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In the WSJ today, I saw where the FTC had set up new disclosure rules for the $1.5 Trillion franchise industry  that will take away many of the previous hiding spots for trouble.  Litigation and turnover are now going to be more out in the open, as are territory exclusivity.  Franchises can also receive applications without an in-person meeting, such as via a secure website, streamlining the sales process of a new franchise. (I’m not so sure that’s a good idea.)

Running a franchise is a unique business endeavor. After all, franchisees aren’t quite entrepreneurs — they have to run their businesses according to their parent company’s rules — and aren’t employees, either, because they’ve invested their own money in the store or service they’re running.   Inc Magazine.

Even if these new rules hadn’t happened, franchises that hid lots of dirty laundry from potential franchisees were being found out anyhow.  Social media and forums was already stripping away some of the barriers to knowledge.

The franchise success depends on competence and compliance as well as the competence of the franchisee.  While the franchise offers training and often grand-opening assistance, there is no way for them to know if the business is going to succeed.  Franchises are not a magic bullet, and many customers simply aren’t doing their homework.  So what you have after a while is a bell curve of success.  On one end, savvy owners making a lot of money and living a great lifestyle - while the “fail” end of the bell curve is full of very loudly upset people - often losing a life savings as they go down.

With consumer-generated-media, the franchises are faced with a really hairy reputation monitoring problem where the brand is only as strong as the weakest location.   Unlike company-owned stores, business model franchises have pretty minimal control over their brand name once a franchise is launched.

Franchise brands are like the dancer with big feet, or the boxer with a big head - it’s just such a big target!

I am always leveraging a company’s PPC brand (and yes, 1+1=3 when it comes to having organic and PPC presence for brand-related searches) there are roadblocks brought on by PPC networks. In the past few months we’ve been dealing with an interloper who has used broad-match on Google Adwords to get around their trademark blocking policy… Note, none of these links are to the interloper in question, I’m just linking to informative posts related to it)
According to Google’s documentation, Google Adwords will not allow competitors to actually use the trademarked keyword phrases in the text of its ads – but does not prohibit purchasing the keyword itself and presenting an ad. This seems to work most of the time, as illustrated by Shoemoney (where it kinda worked.)

For example, I do marketing for a national franchise, let’s call it “Cheeseworks” (fictional) - and I have a high quality score placement on PPC and organic rank. But competitors are able to bid AND DISPLAY “Cheesework Pizza” on Google Adwords (singular, no ’s’.)

Cheeseworks Pizza
Open a Franchise in Your Town
Excellent Opportunity - Low Cost
http://www.fabuliospizza.com

And then somebody else runs this one:

Cheesework Pizza
Are You Ready to Be Your
Own Boss? Learn More!
http://www.franchise-pizza-leads.com

(this company sells leads to franchises - again this is a fictional representation of a real case)

Yes, we filed trademark complaint about them using the singular version of this mark, but since they do character-by-character checks (apparently) - and rejected the complaint. If someone does broad-match triggering on “Cheeseworks Pizza” the ad with the singular version will show. This is wrong. Trademark/Brands are protected from confusingly similar derivatives. I don’t expect Google to become an arbiter of trademarks - they need a scalable system that does much of this - but this case (it is a real case, just as absurd) they should consider the spirit of trademark law considering “use in commerce” and how their match types work.

The interloper had private domain registration and doesn’t answer emails - we couldn’t prove it but there was evidence they were selling leads to others. We had to spend a lot of effort with attorneys to send a C&D and a real substantial threat. The ad is off now, but it required huge work. We’d not expect them to get involved in the McDowell’s vs. McDonald’s case that was in the Coming to America movie. But this was simply a singular versus plural issue that anyone could see was illegal.

Upon removal of the ad (via our legal work) our brand-specific click through rate jumped 4%. This, over the course of several months, adds up to over $6000 in traffic not to mention possible loss of business to a competitor. There is real talk about suing the other advertiser for the harm done. I know Google wants things to be handled “outside” but this is one case where it shouldn’t be.

At the very least Google needs to block by match type when infringement occurs. They should have disallowed broad match at least.

Note: I’m not an attorney - none of this is legal advice. If someone would like to chime in and clarify these issues I will be happy to hear it.

postscript:  I received an email from Google who has approved the singular version of the trademark block.  It took me three tries, and lots of damage done to my client, but at least it’s gone now.  I want to be grateful but still I’m just mad.  

Image from “Coming to America” a terrific Paramount Pictures film. Highly recommended.

I must admit, Donato’s franchise has great pizza. But when it comes to trusting their online ordering environment, they leave some things to be desired. Below find the email that came to my house after ordering online. We knew it was “real” because it came shortly after the order was placed. But Donato’s made two errors. Make sure you aren’t making them in your business.

• Donatos doesn’t use their own domain name for the feedback link, prompting Vista mail to flag the message with a phishing warning. In a world where trust is a critical part of branding, this is just foolish. My family is very advanced when it comes to the web, but many customers would just delete the message without reading it.
• Donatos sends our usernames and password in plain text in the message. You just don’t do this, especially with all of the other personal information in the same message. My family uses different passwords for our sensitive accounts such as online banking, but I am absolutely sure this isn’t the case for many customers. This means the Donato’s password may have been used for more lucrative purposes, such as paypal, etc. We all know that keylogger exploits can do worse damage, but at least they require an infection and many have basic protection.

As some of you know I work with Franchises quite a bit in my SEO/SEM work. These organizations offer something unique to the market. But it’s not easy thanks of some nasty dynamics. While some franchise buyers realize they’re actually buying a model and should retain consistency, many others think that they’re only buying “guidelines” they should be able to color at will.

I’m proposing a system for improving the quality, fairness, and understanding during due diligence as it relates to business model franchises. Essentially, a way for buyers to know who they’re dealing with as they do research.

Let’s take a real-world scenario involving two franchisees who are about to become the target of a due-diligence routine:

Franchisee 1 follows the business model. The operations manuals are well worn and they give the franchise model benefit of the doubt, especially in the early days of their location. But most of the time they pull through it (”the dip“) and if the model is a good one, begin to succeed as designed. They think of the franchise model as “rules” to be followed to the letter.

Franchisee 2 uses their own ideas. They try to run it the way they’d run a business started from scratch. They aimlessly try different things and frustration builds. Their operations manual is covered with dust. They start to lose money, and 90% of the time they blame the franchise. They think of the franchise model only as “guidelines.”

Potential Franchisee 3 comes along, and wants to do due diligence by way of calling or visiting other locations. They begin calling franchise locations. By Murphy’s Law, they call Franchisee 2, and get an earful of how “bad” the franchise is. This can undermine thousands of dollars in marketing effort, many hours of salesperson time, and is how many franchises bleed to death. But also it may put a stop to what would have become a very profitable venture for #3.

I have a simple idea to level the playing field and would love feedback.

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Well, getting ready to head out tommorrow for SMX Local/Mobile conference in Denver, and looking forward to seeing friends in the search marketing world again I’ve not seen since SMX Advanced in Seattle.

I’m very excited about the Local/Mobile marketplace, especially with my developing expertise in working with franchises in internet marketing, and hope to shore that up even more in 2008 with some specific offerings under the PrecisionLocal brand. This is a tough, tough marketplace for consulting as the resources for local search are still quite fragmented and difficult to understand for clients.

Flickr Sets for SMX Local/Mobile

So if you’re going, Twitter me (id: scottclark) to catch up or meet.

You know, sometimes business secrets don’t require much effort to find. The fruits of dozens of locations, millions of dollars in training development, and years of experience can focus on a single experience that’s presented right in front of you. And you are permitted to take notes.

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