Franchises, farming and the value-added economy
The time may be right for an offering that balances farmer independence with the training, image and support of a valuable business connection.

By John Clement

editor's NOTE

John Clement

For three years we carried occasional reprints of the weekly radio commentaries of Elbert van Donkersgoed, then Strategic Policy Advisor of the Christian Farming Federation of Ontario (CFFO), Guelph, Ontario. They appeared under the column title “Letters from Ontario.”

About a year ago, van Donkersgoed became the executive director of the Greater Toronto Area’s Agricultural Action Plan. Continuing the tradition of weekly commentaries from the CFFO is John Clement, the group’s general manager. With his permission, we will continue occasional use of the CFFO columns.

October 12, 2006: Franchises are an extremely popular form of business arrangement in Canada. In fact, our country is one of the franchise capitals of the world, contributing a whopping 10 percent to our economy. Yet for all its popularity as a business model in retail and food outlets, franchising has drawn nary a whisper when it comes to the business of farming.

Over the past 20 years, I’ve heard only two people seriously market the idea of using franchises in farming. One was an Ontario university professor who touted the benefits to farmers from exploring a farmer-owned and controlled franchise system for purchasing and selling farmland. The other was a businessman who was looking to set up a company to market organic beef around the world. In this scheme, farmers would buy a franchise to produce the beef and would have to adhere to the franchiser’s exacting set of standards about production. Although I can’t say for certain, I don’t think there was much uptake for either of their ideas.

On face value, franchises don’t make a lot of sense in a marketplace that has traditionally rewarded bulk, undifferentiated products. And with farmers being among the most fiercely independent people in the world, there has been little motivation amongst them to explore the concept. But with an increasing part of the market for farm products requiring value-added approaches, franchises could conceivably find a foothold someday in farming due to the increased need for collaboration, coordination, risk sharing and other factors. They could be considered value chains, with a twist.

Some people say that franchises aren’t much different from signing a supply contract with a big company, but that overlooks some of the benefits to franchisees within some of the better arrangements. The better franchises in other areas of the economy offer extensive training to the franchisee in areas like operations, technical details, management and product knowledge. Applied to agriculture, it could include training of agricultural workers, human resource help, extension of production and marketing knowledge, branding of products and so on.

Farmers have debated for years ways of gaining collective clout in the marketplace while achieving maximum independence and profitability. And there have been a number of models produced to achieve those goals, including marketing boards and cooperatives. As the marketplace changes to reflect more value-added opportunities and innovation, it may be only a matter of time before some entrepreneur figures out a way to balance the independent nature of farmers within a franchise arrangement that provides the benefits of a larger corporate entity.

Although franchising will probably never become a big factor within farming, it could become an interesting model to explore for certain value-added initiatives, particularly if the model could be massaged enough to fit farmer aspirations. But one thing’s for sure—it would have to warrant the franchise fees people pay to enter the system.

At the end of the day, if it isn’t profitable for everyone, there’s no way it’s going to happen.