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How to decide whether to go into franchise or partnership/co-founder to grow?

I'm in a situation where I want to grow my company and I don't know which form is better to chose - to create a franchise network, accepting a partner into my company or something else. Has anybody a good advice on how to decide? Do you reccommend any reading so that I can decide more easily? I can't find any good resources.

Maybe somebody will have an answer to my specific sitation... so, I will explain a bit. I do marketing communications in travel and right now I'm specialised for one country as destination and one other country as a market. I decided to add another destination country, but that would be handled by another person who also speaks the language of the country. I already found that person. She would be the face of the company for that destination, but I have to teach her everything. In the following years we would like to add more destinations. Does this sound more suitable for a franchise or a single company?

7 Replies

Ankkit O Aggarwal
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Ankkit O Aggarwal Entrepreneur
CEO, Entrepreneur, Visionary, Curator, Incubator, Startup Advisor, Marketing, Hospitality, Custom Contract FF&E
Hi Tina,

This is solely on the specifics of 2 situations with the money you have to invest in franchisee which is usually high and ROI / Break even is longer with limited margins but that brings you education of setting up the business, support, guaranteed business depending on the brand you select which is quite safe and low risk, and have potential exit opens with handsome appreciation over the period of time whenever you like to do that.

However if you can take high risk and invest proportionally you may be able to hit your break even sooner than franchise but then you will have to have a strong plan and also invest in everything yourself.

Both have their pros and cons depending on what are you open to do in terms of taking risk.
Dick Tao
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Dick Tao Entrepreneur
GM at Aldec Taiwan

Hi Tina,

Do you need the help in greater China area?

Regards

Dick Tao

Cheryl Lynne Galler
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Cheryl Lynne Galler Entrepreneur
CEO of Resilience for Disaster(subsidiary of),CEO of OwnYourCrisis,Inc
> Tina Batistuta (http://members.founderdating.com/profile/67780) > started a discussion: How to decide whether to go into franchise > or partnership/co-founder to grow? > > I'm in a situation where I want to grow my company and I don't > know which form is better to chose - to create a franchise > network, accepting a partner into my company or something else. > Has anybody a good advice on how to decide? Do you reccommend any > reading so that I can decide more easily? I can't find any good > resources.Maybe somebody will have an answer to my specific > sitation... so, I will explain a bit. I do marketing > communications in travel and right now I'm specialised for one > country as destination and one other country as a market. I > decided to add another destination country, but that would be > handled by another person who also speaks the language of the > country. I already found that person. She would be the face of the > company for that destination, but I have to teach her everything. > In the following years we would like to add more destinations. > Does this sound more suitable for a franchise or a single company? > > Follow this discussion: > http://members.founderdating.com/discuss/5392?follow=1 > Hi, I am Dr Cheryl Galler I think you will find the class from Harvardx BUS5.1x interesting. It has a class example of your problem. In the class the founder decided not to franchise so that she could retain control over the content quality. However the instructor felt that from an economic view point she should form franchises. Take a look at it. It is free to audit and to view the video discussion of the problem. Best, Cheryl
Chicke Fitzgerald
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Chicke Fitzgerald Entrepreneur • Advisor
Game Changing Strategist, Advisor & Technologist | Board Candidate | Zigging where others Zag
Cheryl -
  • Do you have any proprietary processes or tools that a franchisee would be willing to pay for?
  • Have you taken the effort to standardize how you approach each market and is it well documented?
  • Have you structured what the training would look like for each market and can you do more than one market at a time?
I have nearly 40 years in the travel industry, so would be happy to speak with you if you want to have someone to bounce ideas off of.
Hoofar Pourzand
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Hoofar Pourzand Entrepreneur
Owner, Lotus Industries and Consulting Group
Tina,
Do a franchise if "Location" is number one factor in your success or if it provides significant opportunities for growth later. It's most valuable added value would be the real-estate or access to different location, weather or time-zone in the long run- things that are basically out of our control. One major cost as @chickeFitzgerald nicely implied is the standardization of the process, the equipments and everything else that is involved between you and the customers. I know of one Ride-sharing startup in Europe that used the franchise model for growth in their first year but in the US I never heard of any. Regards, Hoofar
Tina Batistuta
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Tina Batistuta Entrepreneur
founder / brand manager at Mijn Slovenië • gids voor je vakantie in Slovenië
A big thank you to everyone! Your replies are very valuable and helpful. After your thoughts I'm moving more to the decision that franchising is not such a good idea in my case.

@Ankkit O Aggarwal:You are right, my investment would be big and ROI smaller in case of a franchise. There are pros of such approach, but I think I'd rather risk and bet on a strong plan. Thanks for your advice!

@Cheryl Lynne Galler:Sounds interesting! Can you tell me where online can I see that class? I tried to search for it, but I only found something about medical innovations which I guess is not what you had in mind.

@Chicke Fitzgerald:I do have certain tools, contacts and approaches that a franchisee can use and that makes his/her work easier. But I would have to invest a lot of time to prepare it in a way that it's clear and easy to use. So, good point! Thanks for sharing. Also the last point is interesting - for now you can only do 2 markets due to language limitations. But it is possible to add markets in the future.Chicke, I would definitely like to talk to you more since we work in a similar niche.

@Hoofar Pourzand: Regarding the factors of success you pointed out, it seems that my business isn't dependent on any of those. And thanks also for sharing your observation that such companies rarely go into franchising.

@Dick Tao:Thanks, but I'm focusing on Europe for now, it's complicated enough for my current stage.

Greetings to everyone,
Tina
Giles Crouch
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Giles Crouch Entrepreneur
Digital Behavioural Economist | Speaker | Writer | Technology Strategist | on Twitter @Webconomist
There are two other options you might consider, especially is a partner is located in another country.

1) Licensing: a lower cost than franchising, with far less legal requirements. Franchises are expensive to setup and maintain in the U.S. and Canada and highly regulated. Licensing is cheaper to set up and much faster and easier to stop if they become a bad licensee.

2) Agent Agreement: Similar to a license, but they become an agent using the brand, processes etc. They receive revenue share or commissions as you may decide. This is better if they are in another country.

Franchising is complex and you'll have a lot of work to do including financial disclosures and registering in each state or province you look to set up in.
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