Over the last few months, and especially over the last few weeks, I’ve listened, read and argued with people about “evil corporations” and how awful they are for laying off people, not paying their fair share of taxes, etc. The usual object of their ire are companies like Papa John’s who have come out to say that they will have to lay off employees because of the cost of Obamacare.
Discussion about those reasons could fill up two or three articles, but that is for another day. This one is to educate you about exactly who those “evil corporations” really are, and how they aren’t really the big corporations you think they are, but are really just small businesses. By way of full disclosure, my full time job is a paralegal in the legal department of a franchise company, so I am quite familiar with the paradigm.
Many of the vilified corporations aren’t really big corporations at all. They are in a business relationship called a franchise. The legal definition of a franchise is “a privilege granted or sold, such as to use a name or to sell products or services.” Put more simply, a franchise is a license from the owner of intellectual property such as a trademark or trade name, and a business idea, permitting another to sell a product or service under that name or mark. In today’s business world, a franchisor, sometimes incorrectly called a parent company, makes an agreement with a franchisee to conduct a business or sell a product or service in accordance with methods and procedures prescribed by the franchisor.
What does that mean in non-legalese? Simply, the franchisor has a business idea. They usually start it like anyone else, on their own as a small business. As it takes off, they decide that it would be easier or better to sell the business as a franchise. The franchisor then makes agreements with others to let them use their name and related trademarks for a “piece of the action.” That is usually in the form of a monthly flat fee or royalty. The franchisor will also decide what business supplies the franchisee must use in their business. Often it’s the supplies with the corporate name (think food packaging) or the materials they use in their business.
The franchisee, in return gets a few things too. First, they get training and assistance, as well as advertising, promotion, and other advisory services. They get the benefit of the “brand” while remaining its own, free standing small business. They also are usually able to run their business as they see fit, within some guidelines from the franchisor, but things like hiring, firing, decisions about employee benefits and so forth are up to the franchisee.
Many of the businesses you see each day aren’t “big corporations” but are really franchises. Here is a list of some of the best known: Dunkin Donuts, Pizza Hut, 7-Eleven, Servpro, Days Inn, H&R Block, Chick-fil-a, Subway, Snap-on Tools, ServiceMaster, and UPS Store. A list of the top 500 can be found here: http://www.entrepreneur.com/franchise500/index.html .
I’m sure some of the names on the list are a big surprise. Each of these franchises are small businesses. They are probably owned by someone who could be your neighbor. They usually employ 20-30 people or fewer, depending on the type of business it is. A restaurant chain might employ 20-30, while a local H&R Block might employ 5 or 6. The franchisor I work for, Sandler Training, has about 20-30 people working in its home office. Our typical franchisee employs maybe 2 or 3 people, and many of our franchisees work by themselves. Sandler home office is a small business under the typical definition, as many other franchisors are as well. If you look at that list of 500, the myth of the pervasiveness of the “big corporation” is just that: a myth.
The businesses that are being targeted for boycott aren’t big corporations, but are just a local small business. The boycotts are hurting your local small business person, their families and employees. The decisions that each store must make about hiring, laying off, how to contain anticipated costs of Obamacare and the fiscal cliff, are at the store level, made by people who are trying to figure out how to keep their business open and feed their families.
The franchisors are just saying out loud what they are being told by their franchisees. The franchisee is your neighbor or the guy who lives across town. The “big corporation” or franchisor isn’t being hurt by your boycott. The one being hurt is that small business person.
So I have been continually asking those who have been going on and on about “evil corporations” is that really what you want? To hurt the little guy? Do your homework, and support small businesses … all small businesses.
Image: Dunkin Donuts restaurant, Revere, Massachusettss USA. Night view: courtesy of: Anthony92931; Creative Commons Attribution-Share Alike 3.0 Unported license
Lower Image: The UPS Store, Pinckney, Michigan; courtesy of Dwight Burdette; Creative Commons Attribution 3.0 Unported license