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Log In / Register | Nov 19, 2017

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Can't public firms replace wayward founders & CEOs more easily?

In this case, wouldn't it be much harder to kick out a problematic franchisor founder and CEO if it were not a public firm? Does anyone have an example on how a small non-public franchisor, which the founder / CEO owns, is kicked out? In a private firm it is difficult to force the founder/owner out, right? Franchisees certainly could not do it. With an unwilling owner, someone else has to buy his firm, if the money is enough to entice the founder/owner, or the franchisor founder goes to jail.

Yet another example

I know it is an impossible dream but I think it should not be legal for a franchisor to go public. I think that there is an inherent conflict of interest built into the objectives / duties of serving shareholders vs. franchisees - with the franchisees always ending up on the losing end.

Darnelle White's picture

Powerless Liberty Tax franchise owners take a triple hit

All is quiet from Liberty Tax franchise owners, who took a triple hit from this news.

Hit one is to a franchisee's revenue: As news of this spreads, a portion of franchisees' tax clients will choose to go elsewhere because of the alleged office conduct of the CEO of franchisor JTH Holding. Worse, Hewitt is still chairman of the company so its franchises will continue to be hit by dwindling clients.

Hit two is that the resale value of a franchisee's businesses will drop: The businesses of franchisees can now be resold for a portion of the value of what they could have been just a few weeks ago. Powerless Liberty Tax franchisees can only sit and watch their investments dwindle as the franchising firm tries to right the ship, appoint a new CEO and battle the makeup of the franchisor's board of directors. Unlike shareholders, Liberty Tax franchise owners have no say in such matters. But those franchise owners skirting the edge may be put out of business by such governance issues of their franchisor.

Hit three of the alleged sexual harassment by a franchisor's CEO is that the settlement money had to ultimately be paid by franchisees: In the past the franchisor had to pay $500k in settlement for sexual abuse charges of its CEO by underlings (the hostile work environment lawsuit threat), according to the article. Such money does not grow on trees. That unanticipated expense would need to be extricated by the franchisor from franchisees via franchise fees.

For those reasons and more, it would be good if franchisees had a say in their own destiny by helping choose a CEO and chairman for the franchising firm, but that scenario rarely happens. It certainly is not going to happen at Liberty Tax. No, that duty will have to be left to shareholders. Franchise owners will simply put their heads down. Let's hope they are not hit too hard the next time something like this happens within the "independent company" of the franchisor JTH Holding.

John Hewitt was the IFA's Entrepreneur of the Year

The International Franchise Association thinks highly of John Hewitt. He has that charisma and management style that they love. In 2006, the IFA awarded him its Entrepreneur of the Year award.

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