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The 4 Cs of Franchising

The “4 Cs” of Franchising
Author: Kelly Spann

Just like diamonds, “a girl’s best friend,” a franchise can be “a franchisee’s best friend” and be graded or quality using the 4 Cs. The 4 Cs of diamond grading are clarity, color, cut, and carat. Franchises can use the same grading method. The concept of an ideal diamond can be applied to the ideal franchise, so here’s what to look for when researching a franchise.

The 4 Cs

Clarity

Diamond clarity is the quality of diamonds concerning the existence and visual appearance of internal characteristics of a diamond called inclusions and the surface defects called blemishes. Inclusions include structural imperfection. The number, size, color, location, placement, and visibility of the inclusions and blemishes can all affect the clarity of a diamond. Diamonds with a higher clarity grade are more valued. The highest grade of clarity is FL (Flawless). Clarity grading is performed under 10x magnification.

Franchise clarity is also the quality of the franchise relating to the existence and visual appearance of internal characteristics, inclusions or blemishes. These inclusions or blemishes affect the clarity grading/quality of the franchise. Just like with diamonds, the number, size, location, orientation, and visibility of the inclusions/blemishes can affect the relative clarity of a franchise and the overall value. Some examples of franchise inclusions or blemishes are a franchisee’s failure, a customer’s complaint, quick employee turn around, lack of funding, and/or lack of branding. The ultimate franchise grade would be FL (flawless) and is extremely rare (maybe even non-existent) and more valued. Unlike diamonds, franchises have control over their grade. Franchises operated with clarity grading in mind can have a direct impact on their clarity grading and value. Those conscious of their operations, including potential inclusion and blemishes, and those who strive to receive an FL grade have a higher chance at succeeding.

Color

Also like a diamond, a pure and structurally perfect franchise is perfectly transparent with no hue or color. The Franchise Disclosure Document of the franchise is the tool franchises should be using to achieve transparency. A “perfect” franchise should disclose everything to its potential and current franchisees and customers. It should have nothing to conceal or camouflage. In relation to diamonds, cubic zirconia are camouflaged diamonds. They appear to be diamonds but are mere imitators. Scam franchises are the cubic zirconia of the franchise world. They try to disguise themselves as diamonds by masking their “color.” These cubic zirconia franchises are a direct threat to diamond franchises and all franchisees. Diamond franchises should strive to fully disclose as much details and information as possible in a clear language the general public can understand.

Cut

A diamond’s cut is a design guide used when shaping a diamond for polishing. Cut does not refer to shape but the symmetry, proportioning, and polish of a diamond. The cut of a diamond greatly impacts a diamond’s brilliance, which means if it is cut poorly, it will be less luminous/less valued. In its rough state, a diamond is unremarkable in appearance. The act of polishing a diamond and creating the flat facets in symmetrical arrangements work to bring out the diamond’s hidden beauty in vivid fashion. The cut of the 4 Cs is the most difficult quality for the consumer to critique when selecting a good diamond. It requires a trained eye to judge the quality of a diamond cut.

In relation to franchises, the cut is also the most difficult part for the consumer to judge. The cut of a franchise refers to all portions of the franchise working in symmetry and proportion to bring out the franchise’s brilliance. Many factors come into play in judging the overall franchise operation, including the size, failure rate, success rate, corporate employees, locations, suppliers, and more, which may require a trained eye. In this instance, the trained eye can be an attorney who specializes in franchise law, an experienced franchisee, or another person knowledgeable about franchising.

Carat

The carat is the unit of mass used for measuring diamonds. As the carat of a diamond gets bigger the other Cs have a greater bearing on the overall value of a diamond. Franchise, like diamonds, can be measured in units(franchisees). The larger the franchise, the more room for flaws, especially if the franchise grows too rapidly. A diamond takes 50 to 1,600 million years to develop and a good franchise will also grow at a steady pace to support its existing structure before adding additional franchises to support. This is a common mistake among franchises. They seize the rapid growth and don’t realize (or later realize) they are damaging their structure and can’t properly support their size. Just like diamonds, good things take time to grow.

When considering purchasing a diamond, you take time to evaluate the diamonds thoroughly before purchasing using the 4 Cs, the same consideration should be taken when considering purchasing a franchise and operating the franchise. Make the franchise “your best friend.”

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