Like everything else, the value creation has evolved tremendously in recent years. Gone are those old days where value is created at the top by producers and pushed all the way down to consumers or what sometimes is referred to as the Pipe model. In the old days, the entrepreneurs job was to find a customer pain or a product gap and build a business around it, they had to create new products (value), find customers in need for and are willing to pay for such products (producer created value), and if they are lucky enough to find more customers, they will produce more inventory of these products to sell to these customers. Producers were the sole creator of value and customers were simply consumers of the value created by producers. This model is not going anywhere (at least not anytime soon), customers will continue to need food to eat, clothes to wear, houses to live in, and cars to drive, and producers will continue to create and push down as much of these products as customers can consume. So what is changing? The evolvement of the internet and the network based platforms (Facebook, Twitter, LinkedIn, etc.), provided the opportunity to young, tech driven entrepreneurs to create different type of businesses that revolutionized the whole value creation. New entrepreneurs are not restrained by that old box of creating new product for every customer pain out there, instead they maximize the use of the already existing resources. Uber did not flood the market with new and better fleet of taxis that are better, easy to find, and accept payments more easily, instead they created a platform that enabled existing car owners (existing value, no new cars added to the market) to drive on-demand as much or as little as they wish and when and if they feel like it. Airbnb did not build new better and bigger hotels, instead they created a platform that enabled people with extra rooms (existing value, no new rooms added to the market) to rent these rooms to people who need them, when and as often as they choose to. These multi-billion businesses did not follow the traditional Pipe model of creating new products and pushing them down to customers to consume, instead they maximized the use of the already existing yet ineffectively used resources. But who created the value here? Who creates value and who consumes it is not as black and white anymore. The traditional Producer/Customer relationship has completely changed. Think Uber for a second, Did Uber create the value to the rider? Who the consumer of the value is, the rider or the driver? Who the paying customer is, the rider or the driver? The shift to the platform model forces entrepreneurs to think about these relationships differently, their role is to create a platform that allows Users (the rider and the driver in the Uber example) to exchange value they bring themselves, the platform is merely an enabler for exchanging value that already exists, and does not necessarily create new value. It is not the Producer and Customer game anymore, it is the Users game, the entrepreneurs need to understand and accept this new structure to be able to cater to the users who are the heart of their businesses. Whether you think Uber's revenue comes from the paying riders and Uber just pays the drivers a fee to deliver the service (ride), or if you are a believer that their revenue is just a cut from the drivers' fare paid by the riders; at the end of the day the success of Uber, Airbnb and any other platform business is dependent on both sides of the transaction, these are the driver and the rider in the Uber model, the host and the guest in the Airbnb model, and any other value exchanging users in any other platform model. Are you ready to think about your customers differently?
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Have you been wondering before why Franchise Disclosure Documents, aka "FDD", are not public? Do you deeply believe that these documents should be posted on each franchisor website? How many times did you have to fill out these lengthy forms to get your hands on one of these FDD documents? If it will make you feel any better, you are not alone there. If you are reading this post, then you are one of a very large crowd who lines up at the door of every big chain begging to get a copy of their FDD, and unfortunately franchisors know that and they are using it to their benefit. Franchisor are using this to lure candidate franchisees to fill out a form requesting this document, pre-qualify to the franchisor requirements "mainly minimum net worth requirement", and to hook them up with one of their franchise development representatives whose job is to sell you on the franchise concept and convince you how they are better than their fellow competitors, sounds familiar? Some franchisors take it too far and invite you to their Discovery Day where you get to meet the franchisor team who will meet you in person, interview you and if you fit their requirements will sell you even more on their franchise. All of this, which sometimes take weeks, before you are granted the honor of receiving this golden document and get a chance to learn more about the franchisor from someone who is not paid by the franchisor and does not earn a commission by bringing new franchisees to the business. The FDD provides you a different window on the franchisor business using, for the most part, bare facts and more objective view. By law, franchisors are required to tell you not only the good but also some of the ugly too about their business, including any law suits the franchisor has been involved in, an information I would not personally take lightly. Don't get me wrong, I am not an anti-sales by any means and I believe that businesses should find every possible way to attract new franchisees and paint whatever rosy picture they can paint about their business, but I also believe franchisees should have the right to investigate franchise opportunities at a much faster pace, without jumping through too many hoops and should have the opportunity to compare the FDD of all possible competing franchise concepts as they can get their hands on without having to spend hours and hours speaking to franchise development representatives and filling out pages and pages of forms disclosing every penny they have in the bank and every dollar they owe their mortgage company and their credit cards. Too many people are victims of this inefficient process but I have a good news for you, there are two states "California and Minnesota" that make these documents available, and guess what, online, up to date, downloadable in PDF format, and best of all FREE, yes you heard me right FREE, no subscriptions, no one time fee and no catch. Albeit not every franchisor, specially the little sharks, is registered in those two states, yet you will find a large number of them available on these state websites. I included the web addresses for these states franchise registries so you do not have to sweat trying to find them yourself, good luck in your journey! California Department of Business Oversight (DBO) Minnesota Commerce Actions and Regulatory Documents Search (CARDS) |
About the AuthorMostafa Ahmed is the founder and Managing Partner of Vertex Accounting Solutions. He has over 18 years of Financial and Business experience, his passion is to help his clients make the right business decisions, whether they are buying a franchise, starting a new business or managing a growing company. He specializes in financial reporting, budgeting and forecasting, contracts negotiation, franchise evaluation, mergers and acquisitions on both the seller and the buyer side and debt and equity financing. ArchivesCategories |