The rivalry between two branded groups escalates as one increases its market share and range of services at the expense of the other. Another chain decides to rebrand in order to gain better awareness, economies of scale and alignment with an internationally-recognised parent brand.
Sounds like a normal day in franchising, except the franchises involved in the examples above are Australian bikie gangs.
Franchising is a method of doing business, not a business in itself. Businesses that operate under a franchise model in Australia generally perform at an international standard, partly because of our unique cultural and economic characteristics, and partly because Australia has some of the most stringent franchise legislation in the world.
The activities of outlaw motorcycle gangs that are now subject to high-profile law enforcement crackdowns throughout Australia range from drug distribution to extortion and murder.
These activities themselves have nothing in common with franchising, yet the way the gangs are organised which conduct them have some similarities with business practices in the franchise sector. Here’s a short list of key similarities:
Both bikie gangs and franchise networks would be unrecognisable without brands.
Brands help portray the values of an organisation, and exist at the emotional core of what it means to belong to something. In franchising, franchisees make a conscious decision to invest potentially their life savings into a brand in the expectation that it will generate a return on that investment.
Likewise, franchise networks are inherently sensitive to the value of their brands, but are also prepared to change them in order to increase their market potential, and ultimately their return on investment. For example, several Australian franchise chains have repositioned their brands in recent years, changing their logos and store fitouts to welcome a greater range of customers.
Like franchises, bikie gangs develop strong brands which represent the characteristics of the organisation, but are also prepared to change to improve marketability, such as the current rebranding of of the Australian operations of the Finks to the internationally-recognised Mongols club.
Research conducted by the Franchise Advisory Centre indicates that the largest factor in the decision to become a franchisee is driven by a desire for a better lifestyle. In reality, these perceived lifestyle benefits often fail to meet a franchisee’s initial expectations (which are generally unrealistic at the outset), but can eventually be realised after a couple of years of hard work.
Similarly, lifestyle is also a big attraction for members of bikie gangs, although it is likely that any unrealistic expectations about lifestyle will be adjusted more quickly and far less subtly than in a business format franchise.
In a franchise, there is a written agreement between the franchisee and the franchisor which outlines the responsibilities of each party toward the other.
It is unrealistic to think that a written agreement will exist between a member and his or her bikie gang, but there will be an agreement nonetheless – oral or implied – that sets out the obligations of the parties toward each other.
In franchising, if a franchisee breaches their franchise agreement, they will be issued with a breach notice, identifying what has been done wrong, what must be done to fix it, and a reasonable timeframe in which to do so. In rare circumstances, if a franchisee refuses to address the breach, or the breach is irreparable, then the franchise agreement may be terminated, potentially resulting in the loss of the franchisee’s invested capital and goodwill.
Needless to say, the sanctions for breach of an agreement between a member and his or her bikie club are likely to go far beyond the mere termination of the agreement.
The pursuit of growth
Franchise networks and bikie gangs both seek growth in numbers of outlets or members in order to maximise market share and to reduce or eliminate opportunities for competition. Their respective growth stategies may be generally similar, but the tactics employed will be vastly different.
Portrayals in popular culture
Despite the similarities between franchising and bikie gangs, there are glaring differences too. Aside from the obvious differences in relation to violence and illegal activities, bikie gangs have been romanticised (and even portrayed as “normal”) in recent years by popular culture.
Television shows such as the Australian-made Bikie Wars: Brothers in Arms, or the US-made Sons of Anarchy portray the operations of bikie gangs in way that audiences can potentially relate to and even sympathise with the main characters.
Yet no such TV dramas have been made which glamorise franchising or develop a wider understanding of how it works.
Perhaps that’s one thing franchising can learn from bikie gangs.
Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.