Entrepreneurs face many of the same obstacles to growth essentially regardless of industry or type of business. Businesses start out almost entirely owner-operated where the founder is touching every part of the business with their own two hands and working feverishly to keep up with multiple jobs. As the business expands, the first employees are brought on, many times which are family members and then a few “founding member” employees. During these early years, business is grinding with very little strategy, just making it happen every day. It’s the second phase of growth where problems start to arise, the business owner’s ego, a shortcoming in operating systems, deficiencies in staffing and personnel or lack of funding all start to constrict growth of the business. It is these instances when businesses many times will turn to franchising the business as a means to scale and grow the model.
It starts with disappointment in employees, not once or twice, but maybe a dozen times. Someone leaves after you’ve invested time and money Into their development…..no notice, no conversation, just an email saying they are submitting their resignation. Or the upset customers who call or email or worse yet, Yelp their concerns to you about interactions with employees who just didn’t put forth any effort. Sometimes it feels like your own team is greater competition than other brands in your industry. That’s not to say all staff are bad, but the more you expand organically, the higher the percentages get that you will run into difficult staffing obstacles.
Then there is the need for capital which is certainly a significant obstacle for any entrepreneur who is trying to expand their brand. Fixed location businesses have enormous capital needs with each location that is opened possibly exceeding $500k per unit along with lease and operating liabilities should a location not succeed. Investors ask for the world and want such a large percentage of the business, it seems that there isn’t much left over for the one who has put the most blood sweat and tears in. In addition, partnerships get tricky and complicated and many times end up in divorce. The reality becomes that unless a family member or friend is going to invest, the market is very small until you prove the model for scale. All of this creates a very compelling argument for franchising.
When you franchise your business, you have achieved the ultimate version of scale. It is the epitome of trust from the entrepreneur to empower a franchisee to take your entire business and duplicate not one element of your business, but the entire model. To franchise a business you create a vehicle to allow for investment into your brand without giving up equity in the brand. The model also creates a dynamic where the franchisee becomes an owner-operator for the brand in each market they open a franchise. The franchise platform allows for both the infusion of capital and addresses the staffing issues inherent in growing a business.
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