Sunday, July 06, 2008

Franchising Booksellers

I'm always thinking about ways to resurrect/save/reinvigorate the bookselling business. So, when I heard this week about Starbucks' trouble (closing 600 company-owned stores), I begin to wonder about their troubles and translating it to another retail industry

I am one of those hypocrites who complains about the big-box bookstores killing the industry while simultaneously shopping there myself. There's a Barnes & Noble gift card in my wallet right now. There are maybe two main reasons people like us shop at these stories. First is their ubiquitousness. These stores are everywhere. Certainly much closer to me than my nearest (decent) independent bookstore. The second reason we frequent these sorts of places despite our moral qualms is that we know what to expect.

The retail franchise model supports these two explanations, but does something more. It puts the success or failure of the store in the hands of the franchisee. This is why I think it could succeed as new model for bookselling.

The corporate office in the franchise provides branding, which may be the most important element of what they do, but they also offer support. Support is much different than mandates. I'm not sure how much liberty the buyer at the local Borders has, but I'm relatively certain the books they chose to promote, what ends up on the stores displays, in their windows, are directed from some corporate office far, far away. An independent owner/operator, though, would have freedom to respond to his/her individual market, absent of corporate mandates.

Now, since the time my mind crossed this possibility, I've been imagining many different scenarios, many different ways the relationship between franchiser and franchisee could work. I just want to put the thought out there. I know little about the industry in detail, and my knowledge of the franchise set-up comes from my time as a manager at a pizza delivery chain. So, I'm no expert, but maybe someone out there knows more and could help build the business case--or, tell me I'm just wrong.


  1. Franchising is basically a copout which enables corporations to pass the financial risk of expansion (because public corporations have to grow at all costs, just to appease Wall Street) onto others while still maintaining significant operational control. Though franchisees have to put up their own capital, they still mostly have to abide by the dictates of the corporation and really aren't free to tailor their operations to the local market. For example, McDonald's (probably the most successful franchisor in history) recently mandated that its operators add espresso machines to offer specialty coffees (ironically, to tap into the high-end coffee market which Starbucks now admits it has oversaturated) and has aggressively marketed the $1 menu to boost top-line revenues despite the fact that a) operators are hard-pressed to pay for their share of the new espresso machines and required site reconfiguration and b) operators make little to no profit from customers buying $1 items. It's understandable why a franchiser would act this way - they want to retain control of their brand. But a franchisee has to sacrifice most of its independence to use that brand.

    If somebody really really really wants to own a book store, then franchising would make sense, but if they want to be a bookseller because they want to be their own boss, it's doubtful a B&N would really allow that to happen.

    (If I sound crankier than usual, it's because my office building had a power outage on this muggy day and it's about 88 degrees at my desk right now. But most of the above would still be my position, even under reasonable temperatures.)

  2. Pete, I agree that in many situations the franchise relationship is primarily beneficial to the franchisor. Having done my time at McDonalds while in high school, it was obvious that the relationship just pushed the stress down to the franchisee. What I'm thinking about is a different sort of relationship.

    We see independent booksellers closing their doors with growing frequency. They can't compete with the big box chains for many reasons. But maybe there is a way to compete against B&N and Borders, while still maintaining some independence.

    Like I mentioned, the franchisor would help with branding, marketing, advertising, but what might be more important, it would consolidate buying power. B&N moves enough books that the publishers give them incredible deals to buy their books, enabling B&N to slap their 20% off sticker on all the bestsellers. Independents can't compete against that. If, though, buying from the pubs was consolidated, the franchisee could possibly buy their books for the same wholesale price as the major chains.

    I want to think that their could be a bridge between the independent and the large chain, some sort of business model that allows the bookstore to respond to their local markets, make independent decisions, and not be held under the thumb of a large corporation. This would not be the McDonalds model.

    I'm trying to remain optimistic about the bookselling industry. There must be other options.

  3. That wouldn't be the McDonalds model, nor the model of many other successful franchisors. Retention of control over operations and marketing is one of the key elements of franchising. I can't imagine B&N relinquishing that control over their brand, and I can't imagine an independent bookseller who is used to calling all the shots abdicating most the decision-making to the higher-ups at B&N. If a bookseller wanted to be a de facto B&N employee, they would have already closed up shop and signed on with the behemoth.