Screw You!.... by Art Rothafel

"Screw You!"

Those were the closing words (well, not exactly those words...) to me from the Director of Licensing for a popular franchise operation (name left out on purpose) as he abruptly ended our phone conversation.

Why would he be so upset with good 'ol kind-hearted, lovable me?  Two words: Preferred Vendor.

You see, many of the franchise operators set up preferred vendor programs whereby they list a vendor, like us, as a "preferred vendor" to all their franchisees or licensees.  In return, the vendor pays a kick-back (no matter what you call it, it's a kick-back!) of anywhere from 5% to 20% to the franchise or license operator just for being listed -- in hopes of referrals and sales.  There are no guarantees.

I simply refuse to do it for a whole bunch of reasons.  But the biggest reason is because we support the "warriors in the trenches."   If you're an owner, you know what I'm talking about. 

We support the fitness professionals and owners, who, EVERY DAY... unlock the doors, open the facility, know their members names, deal with the daily problems and most likely are the last ones out at night.   THE ONES WHO ACTUALLY DO THE WORK!

It makes no sense to us to pay a kick-back just for listing us as a preferred vendor. I'd much rather provide those savings to the Warriors who do the work.  Wouldn't you?

So here's why the guy was really mad at me:  

A bunch of his licensees (10 of them) got together on their own and made a bulk purchase from us (500 pieces) and saved over $1,150. They received the discount. They divided the savings among themselves.   In other words, they kept the money instead of it going into the pockets of the franchisor.

That just seems fair to us. 

So, to you Mr. Franchisor.... back at ya! 

Happy New Year to all you Warriors in the Trenches... and here's to your continued Success!   

Art Rothafel
art@privatelabelfitness.com
800-340-7011
www.privatelabelfitness.com

Comments

[Sean Kelly]

Art:

Great blog!

I was happy to find your lively blog today. I blog on franchising and fitness clubs, and am a 20 year franchise industry vet having worked from every side: franchisor, franchisee and vendor. Like you, I don't make it hard for my readers to figure out what I really think.

I have managed franchise advertising funds and rebate programs for years and have set guidelines and run interference in that DMZ between franchisee and franchisor. I urge franchisors to make their money off the royalties and either rebate vendor fees or put them into the systemwide marketing fund where their use is tracked and disclosed. This is a huge trouble spot and not worth the ill will and suspicion it causes with franchisees - even when they have a valid reason for insisting on preferred vendors.

While your advocacy for the franchisees is well-placed, except for with the most blatantly greedy franchisor you're not doing the franchisees - or yourself - any favors by open defiance of the franchisor. It's the franchisor's logo, their trademarked name, and if they really want to screw you they'll wait til your private labeling is done then send you a cease and desist telling you to destroy it all. The franchisees only license the use of the name, subject to the franchisor's case-by-case approval.

The bigger issue is that - at least in a reasonable franchise - you're fracturing the buying benefits that could be provided by the entire system adapting the program. I'd suggest working with the franchisees - or franchise marketing council - for a program that all franchisees would agree to. However, you'd take the "kickback" amount and use it to provide point-of-sale materials and a supporting marketing program. This would help the franchisees build a new profit center, and the franchisor would get theirs in royalties, positive press and goodwill.

Keep the fire going!

All the best, Sean
www.franchisepick.com
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www.franbest.com/fitness