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Pi Day

March 14th is pi day.

Pi is the ratio of the diameter of a circle to the measure of the the length of going around the circle, its circumference.

It is both irrational and transcendental. No two integers, A and B, expressed as A/B equal pi.

Nor can no finite sequence of algebraic operations on integers (powers, roots, sums, etc.) could ever produce pi.

So what?

What does pi have to do with franchise due diligence, fraud or business opportunities?

Roll any circle in a complete revolution. Mark from beginning to end. Take the same tape measure and calculate the diameter. The ratio of those two easy measurements in pi - on of the most mysterious numbers we know.

Think of how simple that was. One circle - one length. The ratio of both is pi.

Yet that simple ratio, pi, is both irrational and transcendental. A very complex number.

A large measure of complexity has been introduced with a simple tool: comparing A to B, when A and B have no common measure - thus, A/B is irrational.

Now, think about the number of trade-off you need to make when comparing different franchise systems.

How should royalty A with vendor rebate C be compared with royalty B compare with vendor rebate D?

How should a territory with size A, but with reservation rights which allow the franchisor to compete with you using a different brand, be compared to a smaller guaranteed territory B with no reservation clause?

How should you trade off the rights to a jury trial compared to only arbitration?

How do you compare a trade mark which is popular in only a region with a national trade mark but this not as strong?

How do you compare going independent with being a franchisee?

If measuring the tradeoff between a circle's diameter and length is excruciatingly hard - why do you think the franchise choice is easy?

Because you don't think - you just do. (Any many times, lose all your investment.)

Full post as published by Misleading Advertising Law on March 13, 2008 (boomark / email).