Why are collectives not as successful as traditional companies?

Question

In my home town I've noticed that collectives very often fold or cease to continue as a collective. Are they not as competitive as a traditional company and if so, why?

Answer 1

It's the Socialist v Capitalist question. Collectives, or coops, may not always be as financially succesful as traditional, but there are other measurements of success. The financial downsides may be due to providing members, staff or partners with better conditions.

Sadly, in a world where turnover and profits are the only benchmark of achievement, collectives can rarely compete with the economically driven company. This could be seen as a metaphor for why socialist economies have struggled to compete in the modern global economy (it could also be because crazed megalomaniac dictators seem to rise to the top of socialist nations!).

Answer 2

Competitiveness depends on a number of factors, but it is less likely that that is the reason why franchises are less successful as the traditional companies in your home town.

There are a variety of reasons why franchises are difficult. While they have their pros, there are cons to consider.

-Less Freedom: Franchises must share financial information (even in the public sense) and many must conform to operating proceedures that are set by the parent company. In cases such as these, you, as a business owner, cannot make important business decisions that would effectively benefit your operation--adapting to you specific area...this can have a dramatic effect on the success or failure of your franchise.

-Royalty Payments: Every year of operation, franchisees are required, out of contract, to make royalty payments in return for support in operations and advertising. Some franchisers DON'T provide all these necessary resources for your location's success....this is all in the franchise agreement. And, the agreement may, because of lack of freedom, conform the franchisee not to be able to charge over certain amounts for product...to make up for these costs of support, otherwise.

-High Start-Up Costs: Buying a brand name franchise is often beyond the financial capability of many potential business owners. You are told that your building must look like this...you must buy your fixtures from "them," you must buy this particular product from "us." You sometimes, because of the franchise agreement...them wanting to 'stay consistent'...like McDonalds (although, McD's works very hard at keeping specific costs down, from what I understand...and they give a certain amount of freedom to their franchisees) loose out totally on the ability to have financial control/thus making your business financially unstable, because of your contract. This is probably a very good reason why you see independent businesses succeeding over the collectives...the independents are probably more realistic financially--thus, builing a strong business.

And, Broken Promises: The franchiser may not have the ability to provide market or field support, LIKE THEY PROMISED. Owners can sometimes become reactive and expect the head office to solve all the problems. In your own business, the only person you count on is you.
:-)

Answer 3

"Too many captains, not enough crew." Also, imo, the personalities that usually form a collective are not so capitalist-minded. They tend to be people with a strong belief in social justice/employee rights and that - like it or not - can be a hindrance to commercial activity.