Consolidation: The Future of the Independent School Owner? Part 2

AFFILIATION VS. FRANCHISING

There are benefits to both affiliations and franchising, but close examination shows a sizable difference in the control of quality. Many organizations have voluntarily made the switch from affiliation to franchise, primarily to ensure better control of product quality.

The main difference between these two organizing entities is the legal ability to enforce conformity and quality. While some associations may try to instill control through the use of gradings and association “logos,” for the most part, the only true obligation the school owner has to the association is lip service. If the school owner has any disagreements with the affiliation, they need only provide nominal notice and then resign from the association.  

On the other hand, the reason franchises have been successful in the past is due to the legal ramifications the franchiser can evoke if a franchisee does not adhere to the strict business model and requirements laid down by the former. This includes forcing the existing owners/franchisees out and placing a new management team in place, if need be.

We must also not confuse affiliation with licensing. Licensing is more similar to franchising than affiliation, although it shares similarities to each.  Licensing is when a product, service or brand is leveraged for the purpose of increasing a business’s profile. Both licensing and franchising are considered business opportunities, and thus have legal consequences. There are governmental or regulatory disclosure requirements for both, which is not the case for affiliations.

While martial arts associations require affiliated school to adhere to certain criteria, a franchise operation requires the school owner (franchisee) to strictly follow the franchise’s rules. This shouldn’t seem out-of-the-norm – after all, many martial artists trained in an environment of strict regulation. However, ego and a “my way or the highway” complex has claimed many owners in the past.

This is why most martial arts franchise operations look closely for a certain type of investor. Some even stipulate that the franchisee-to-be is not already a school owner!

In addition, many franchise operations have differing requirements with regarding how the business should be run. Some franchises want tight control on all aspects of the operations, including ranking, sales, marketing and even instructor selection. The stricter franchises are also likely to provide more support and training. Others simply provide the business model and logos, with a little bit of marketing training thrown in. If you are a martial arts school owner or potential owner and considering franchising, you need to do your homework to find one that is the right fit for your aspirations.

Is franchising for you?

Not everyone is comfortable taking responsibility for the wellbeing of not only a business, but, in most cases, the livelihood and aspirations of many others as well (employees and customers, etc.).

While a great product, service or concept can drive success for a franchise, that’s not the main reason it succeeds. The success of franchises, like Century 21 real estate or Dunkin’ Donuts, for example, is the result of pristine operations procedures, the professionalism of the staff and the efficiencies of delivering reliable quality in a short time. It is this perfection of a system (or process) that is the ultimate reason for its success.

This could mean that you, as a school owner, would not only have to modify your business practices, but in many cases would have to amend your curriculum and possibly the style of martial art you teach. In other words, there are a lot of considerations to be made before you know whether you are a true franchisee candidate.

The one fact I really wish to emphasize here is that the consolidation we are seeing today (whether it be via franchising or multi school ownership) has evolved from the fact that there are those of us that truly appreciate the martial arts and do not like seeing it being exploited.

Unfortunately, there are also those school owners that use the mentality of not wanting to sell out their martial art which stops them from using the myriad of support mechanisms now available to the martial arts school owner. The use of the moniker “McDojo” has caused many martial artists who feel they must remain fully independent in order to be “true to their style” and that any real business consideration is deemed beneath them.

It is true that in the past there were a few individuals that tried to exploit the rising popularity of the martial arts in order to milk as much money out of an unsuspecting public, but fortunately this trend was (and still is) quickly recognized by today’s more savvy customer base and shut down.

This image that you will become a “belt factory” if you consider consolidation in any form is still inhibiting many quality martial artists from becoming successful business people. The martial arts industry is aware that there any many people who simply wish to teach martial arts in a small traditional method and they are respected for doing so. On the other hand, if you are going to take your martial arts talent and develop a business around it, then your mind set must change.

This is how today’s martial arts professional organizations came into being. Whether via franchising or professional associations like MAIA, these new business organizations have brought in professionals from other well-established industries to ensure the integrity of our system (and the martial arts) is maintained. The last thing true martial arts business owners want is to be thought of as trying to simply make money without concern for the student. This is why quality control is such a priority in all new franchise, affiliation or professional support groups.

What this means is that you, both as a martial artist and a business person must decide which path to take, either joining an affiliation, exploring the opportunities of a well-established franchise or remaining independent. In our next Blog, we explore whether remaining fully independent is really an option in this demanding customer centric business environment we now live in.

Andries Pruim is a 6^th-degree black belt in Shotokan karate with over 45 years experience training in his home country Canada as well as in Japan. A former martial arts school owner, Pruim has 38 years of corporate financial and business management experience. He is a Certified Financial Planner, and continues to renew his CFP designation and update his financial knowledge and skills. In the martial arts world, he is currently a Senior Instructor at two karate schools in Langley, British Colombia, Canada.