MarketWatch recently covered a story on Subway’s Jared Fogle and 10 other celebrity endorsement deals gone bad, raising the question, “Are celebrity endorsements worth the risk?”
Franchise brands like Subway, beleaguered in highly competitive market segments, face significant challenges in the wake of scandal. The fact that endorsement and spokespeople are addressed in Item 18, Public Figures, of the FDD (Franchise Disclosure Document) should be warning enough that the FTC still feels it a relevant caveat for prospective franchisees.
The persuasive power of celebrity endorsements is only one scandal away from a media disaster – as seen with Subway and even Kenny Rogers Roasters in the 90s after its namesakes’ scandal left franchisees and the public with a bad taste for the brand.
Franchisees already face a host of potential pitfalls, any of which could represent a critical failure and cause them to go out of business. Why would they want to add the uncertainty of public figures to the mix? Prospective franchisees typically begin their search online and pick opportunities based on investment levels and geography. As a result, Ad Portals have set up tools to feed that behavior. It’s a classic case of “bright shiny object syndrome.”
David P. Martini, of Franchise Quote, LLC explains, “I flip the typical model on its head and coach prospective franchisees to first get clarity around their unique personality and character traits, their value system, and long term goals for income, lifestyle, wealth, and exit strategy – then, and only then, do I work to match them with an opportunity that allows them to support those variables behaviorally.”
It’s a situation where newer brands like Under Armour have used celebrity endorsement to their advantage, but look what happened to Hertz in the wake of O.J. Simpson, or Tag Heur with Tiger Woods, and Nike with Lance Armstrong.
Those companies can drop the spokesperson and hire a PR firm for damage control. But, when consumers often associate the product with the celebrity a whole new set of challenges face franchised business models and their respective franchisees – especially those early in their development and perhaps not enough working capital to survive a significant dip in sales.
To complicate matters, the franchise search environment is over-run with marketing collateral and prospective franchisees all too hungry to consume it – motivated more by the instant gratification of information over real education.
To better understand why the involvement of public figures is less appealing than one might suspect, let’s take a look at some of the common pitfalls a franchisee faces:
* Franchisees must wear several hats; a deficiency in any one particular business skill – typically salesmanship – could result in failure.
* Several will underestimate the commitment they’ll have to make in order to stay profitable.
* Franchisees may have to adapt to HR concerns and deal with inexperienced or incompetent staff.
* The location itself could offer challenges if it doesn’t have the foot traffic to help produce potential customers and again if the lease is unaffordable.
* Many franchisees overextend themselves in regards to funding and don’t have enough working capital.
* Their decision to join a particular franchise brand may be emotional rather than pragmatic.
* Given royalty payments and product or equipment stipulations that reduce profits, some franchisees may not be able to compete with other non-franchise competitors.
* Some franchisers – particularly those less tenured – may not be able to offer proper support or the system itself may be flawed.
A prospective franchisee must educate themselves on the variables that lead to both their success and potential failure. With so many obstacles to overcome we can conclude:
* Franchise brands that use celebrity endorsements are taking a huge risk that could turn disastrous for franchisees at any moment.
* Prospective franchisees may be blindsided by the “bright shiny object syndrome” associated with public figures, seductive marketing collateral, and their own emotional bias.
* Rather than abdicate any part of the education, research or validation process, prospective franchisees should invest in themselves and their future by enlisting the services of a franchise coach to navigate the selection process.