A Franchised business will still have a much better chance of...

A Franchised business will still have a much better chance of success than a non-franchised business model. 75% compared to 25% (source FCA). Due to:
- known brand ("Joe's Donut's" will not be as widely known as Donut King)
- greater buying power (Joe's Donut will not have buying power of Donut King!)
- central marketing/advertising (Joe's Donuts cant afford to advertise in major TV, newspapers, internet etc
- franchise systems have rarely 'fallen over' once they achieve scale. A few exceptions include Eagle Boys and Klein Jewellers.
- assistance for first time business owners (eg book keeping, margin management, negotiation with landlords, suppliers, training etc).
- awareness of best practice. For example at Bakers Delight annual conference each franchisee wears a name tag which also details their turnover and GP and NP Margin!.
- investment in technology. Joe's Donut's cant have the reward programs, push notifications to loyal customers mobiles, constantly updated social media etc.
- Gain entry to Shopping Centres and high profile spots. RFG being head lessee is a huge benefit to a business owner (Joe's Donut's will rarely get prime sites near anchor tenants, Westfield food courts etc).

I am making the point that franchising as a structure is not flawed. Look at McDonalds and many other success stories. RFG may have tilted the benefits too much to the Franchisor (and us as shareholders) which is a short term approach. But that is always going to be a delicate balancing act. But do we know this for sure yet? How much do they really need to tilt it back to franchisees? If they tilt the profits back slightly to franchisees it could be a good thing for the success of RFG (Franchisor) and shareholders in the medium term anyway. Pizza Hut (currently owned by Private Equity) is in the process of doing that turnaround now and apparently having great success with happy franchisees and you can bet the franchisor (Private Equity) is ensuring they get a great return.

A couple of friends I have who operate successful Donut King store, I believe, would have failed in the first 2 years if they opened up a few "Joe's Donut's".