Who Pays for TV and Radio Advertising?

Turn your television on and for a single hour, jot down the commercials you see on any of the major broadcast or cable channels (ABC, NBC, CBS, ESPN, CNN, etc.).  On major channels, there are three main categories of advertisers.  (Check the bottom of this post to find out what those three are.)

Though it cannot be proven, franchising advocates continuously quote that 40 to 50% of all retail is franchised.  (The data is owned by too many people and influenced heavily by pro-franchisor predatory bigots.) When you analyze the data of your one hour’s worth of major network advertising, it will become apparent just what the three verticals are that spend the lion’s share of advertising dollars with Madison Avenue agencies.

But that’s not the question or the purpose of this post.  The question is: Where is the money coming from?  First of all, some history.  McDonald’s ignored all conventional wisdom over three decades ago when they surpassed the 100 million dollar mark in advertising spend in a single year.  Most could not fathom the thought of such.  How did they justify it?  Simple, it wasn’t their money!  It is the money of hard working franchisees who pay exorbitant royalties to franchisors who spend it freely and with reckless abandon.  McDonald’s practices are truthfully depicted in in Fast Food Nation, author Eric Schlosser.  They pioneered the principle of going after your children, the pester power method.  But that again, is not the issue.  The real issue is that many franchises are B2B and not B2C.  Nearly all of the franchises that are offered at low entry fee are B2B.  These predatory franchisors have no intention of doing anything with the hard-earned  money they collect for advertising from your profits.  When asked the question of where that money is spent, or better yet when reading an FDD or UFOC, it is up to the sole discretion of the franchisor whether or not those funds are even earmarked for advertising.  Read an FDD and if you can even find the subject covered, you will see that the money can be used for advertising or any other thing the franchisor chooses.  Many simply use if to fund their playboy lifestyles.

So the next time you see David Brandon bragging that he’s giving money back to Main Street, don’t believe it.  He’s spending the money of the franchisees as though it is his.  When you watch a Subway commercial, remember that Fred DeLuca is the slimiest franchisor in the world, fighting more lawsuits than McDonald’s, Dunkin Donuts and Pizza Hut combined.  Fred gladly sells single franchises to unsuspecting immigrants (all they need is a pocket full of cash) when he couldn’t make it until he owned three!!!  When you see a Quiznos (seedy and poorly thought-out million sub giveaway campaign), know that Rick Schaden and his staff of flunkies approved the campaign and then fired the VP of Marketing (who came from telecommunications – how ignorant and cheap is Schaden for even hiring her) as a scapegoat.  (It’s only a matter of time until Quiznos loses the pricing game, thus driving all of their franchisees out of business.  Freddy D. has 6 or 7 times the number of franchisees, thus a war chest of over 400 million dollars a year at his disposal (pun intended).  Ricky hasn’t a chance of winning a price war.

So the next time you watch a Nascar race (if you can stand the fact they never learned to turn right;), count the number of advertisers who sponsor a car and then see how many are franchises.  Then realize that Ricky and Freddy and Davey are all spending 4 to 5 MILLION per car to put their brand on the hood of a race car!  That’s right, the hard-earned money of your relatives or friends or immigrants (who are unaware because they’re probably working 7 days a week just to make ends meet) is being spent so Ricky and Freddy and Davey can sit in the infield or in VIP boxes,  get special privileges at the expense of those who labor just to scrape by.

The three vertical leaders in advertising are auto, beverage and food.  (Yes, they are all franchised; GM not for long – they are soon to be owned by you and your Commander-in-Chief, who by the way, operates just like a franchisor.  He spends your money and you have absolutely not one damn iota of say in any of those decisions!)

Bloody

“Franchisees – Shut Your Mouth or Lose Your Livelihood”…Rick Schaden

The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants. Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees’ lawsuit against Quiznos to proceed as a class action.

The Toronto Star
May 1, 2009

Quiznos closes plaintiff’s stores
After being certified to pursue class-action suit, owner of three outlets in Oakville shut down
Dana Flavelle

Quiznos closes plaintiff’s stores
After being certified to pursue class-action suit, owner of three outlets in Oakville shut down
Dana Flavelle

The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants.

Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees’ lawsuit against Quiznos to proceed as a class action.

The class-action certification represents a major step forward for the franchisees, Johnson said.

“Without the ability to bring this case forward as a group, franchisees face insurmountable obstacles in enforcing their legal rights. We now have a real chance to fix the problems of the past and help franchisees in the future,” Johnson said.

Once again to quote the now deceased Harold Brown’s book (published in 1980 and updated until Release 32, 2001), Franchising: Realities & Remedies, 1.01 [1]

Background of Franchising

[1] –New Concepts

…..As franchising has grown, however, the growth has been acompanied by a number of disputes between franchisors and their franchisees.  While legal disputes are to be expected in any long term relationship, franchisor/franchisee litigation has resulted in franchisors drafting progressively worse franchise agreements for new franchisees to sign.  Ironically, even a franchisee who prevails in litigation or arbitration ultimately harms prospective franchiseees in his system.  The losing franchisor is faced with two options: (1) alter its wrongful conduct, or (2) draft a more one-sided franchise agreement that states that the franchisor is permitted to act in any manner it sees fit.  Remarkably, franchisors almost always choose option number two, and  written franchise agreements reflect an even greater imbalance in power between franchisees and franchisors from year to year.  Franchisee advocates are forced to argue tougher and tougher cases each year as many courts refuse to recognize the imbalance in the relationship and, instead, enforce the language thrust upon the franchisee.

What a phenomenal business model!  Write a one-sided contract, if they sue you, shut them down!  If you lose, change the agreement to make sure they can never sue you in that manner again and cripple the incoming franchisees even more!  Hello franchisees – are you there!  Do you not understand yet?  You cannot fight a crook using a system run by the crook’s buddies (the courts)!  Call it naivete or ignorance or whatever, but the very reason most end up in arbitration is so that the courts could let the franchisors do “what they please”.  If your case makes it to court, then you’ll only end up with a class action or civil case in which you’ll only receive a small portion of your investment (the lawyers take the lion’s share) and then you get to start over!  Cool!  Awesome!  Wage your entire life savings and lose it.  Borrow more (now you’re waging your children’s and fellow taxpayer’s future lives) and fight the good fight against the enemy on their turf!  While you’re fighting, you cannot make a wage because the franchisor can shut you down!  If you win, you might get a tiny fraction back, if you lose, you lose two lives worth of investment.  Either way, you get to start over and fighting on prinicple, doesn’t pay the bills.  Doesn’t sound like a battle much worth fighting.  (I much prefer finding legal ways to make the franchisor’s lifeso bloody miserable, he has to change or suffer the wrath!)

Bloody

Quiznos Torpedoes It’s Franchisees!

Quiznos wasn’t happy with giving away its franchisee’s money with the unannounced 1,000,000 free subs, they’ve now risen to an all new low by dropping the bar on sandwiches from $5 to $4.  So how did this come about?  Well, it starts with your young and less than knowledgeable (no clue on human nature, past historical ramifications of such actions) marketing person, Ms. Rebecca Steinfort:

“The reality is that we are a challenger brand,” Chief Marketing Officer Rebecca Steinfort said in an interview. “Our main competition is Subway, which is an 800-pound gorilla. We may be 200 pounds, but they’re 800.” – AdAge article by Emily Bryson York

Now who pays for the reduction in profits?  Why the franchisees of course!  Check out the next statement:

At Quiznos, marketing failed to drive traffic and closed stores. The chain now has about 4,500 locations worldwide, by Ms. Steinfort’s estimate. The company is private and does not disclose sales figures. – – AdAge article by Emily Bryson York

What a great job!  I can try and try and try until I get it right, because I don’t have to absorb the cost of my actions!  The franchisees take all the grief.  I get to sit in the VIP box at the Yankees games while those miserable blokes deliver sandwiches 24/7!  The franchisees are simply collateral damage.

Question for Ms Steinfort: If stores go out of business selling a $5.00 sub, then how many more will go out selling a $4 sub?  Let’s view Ms Steinfort’s experience/profile on LinkedIn:

When one scans education, it’s quite respectable (Princeton, Harvard Business), though still wet-behind-the ears on experience.  But look a little further and you see Ms Steinfort came from Level 3 Communications claiming a title of corporate strategy, and it’s labeled as (Restaurants Industry).  Folks, Level 3 is a telecommunications firm which barely survived the dotcom bust, the telecom meltdown (thanks to a billion dollar bailout by Warren Buffett).  IT’S NOT in the RESTAURANT BUSINESS.  Can you spell L-I-A-R?  Does this speak volumes as to how desperate Quiznos is and how no one will work for them who does have a brain?  Ms Steinfort has found a place to play with absolute immunity from prosecution!  Obviously, she couldn’t make it in the telecommunications market as Level 3’s stock topped out at $120.00 about the time Ms. Steinfort started, immediately dropped below $10 in a freefall, never to recover.  Today Level 3 is selling for a paltry $.95  (having realized a low of .76 the last 12 months).

So tell me people, wouldn’t you rather have someone selling your sandwiches whose background is in telecommunications?  And wouldn’t you rather it be someone who ran the previous company into the toilet (stock prices from $120.00 to $.016!)?  When is America going to wake up and realize that the franchisors and Madison Avenue are no different than Wall St., AIG or Bernie Madoff!  They’re the elite and you, main street America are the idiots falling for the ruse!  Prediction:  Quiznos will continue to be the “Sprint” of sub shops without any hope of being purchased (there’s only one Wal-Mart folks).  They will die a wikid slow death at the likes of boneheads like Ms. Steinfort and Mr. Schaden.

Bloody