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Franchisors to Prospective Franchisees: Look like me? Not really....

I learned very early as a child that in many ways life is about definitions.  "Be good," my mother often told me.  "Work hard," my football coach would yell.  "Be safe," said my father as I headed-off to school.  These examples all make sense, until you ask for the definitions of "good", "hard" and "safe."

There's another term that is often used, but not any less ambiguous than the aforementioned examples: "small business."  Who are small business people and what do their companies look like.  Some would say companies with 50 or fewer employees.  Some would say fewer than five.  Some would ask for revenue to determine the classification of "small business."  It's such a nebulous question, that the U.S. Small Business Administration (SBA) actually produced a white paper to explain its definition of "small business".  The document is a mere 61 pages long.

Most would agree, despite the varying definitions of "small business", that most start-up franchisors generally fit the billing of a small business enterprise.  These visionaries usually start small, oftentimes contributing their life savings to begin a venture with an uncertain future.  The hard work, perseverance and grit carries them to success.  And through franchising, replication of their efforts sees expansive growth of their brands through franchisees that presumably look very much like the founders of the company themselves.

But increasingly, more franchisors are growing by hitching their wagons to large, experienced multi-unit organizations capable of quickly opening multiple franchise locations in a very short period of time.  This, of course, seems to makes sense for the franchisor - the quicker the brand can grow, the faster brand, market share and financial success can be realized.  Some would argue these large, well-capitalized multi-unit franchisees are indeed "small businesses."  By SBA standards they may, in fact, be small businesses.  But this much is true: there is quite a divide between the multi-unit franchisee organization and the make-up of the typical business start-up.  The typical start-up organization may, in fact, look more like the franchise founders did years before.

In a recent edition of Inc. Magazine, I read about a relatively new franchisor in the burger business.  The company started small, achieved some local success, grew from one location to five over 16 years, franchised and is now in position to be a global brand.  But there's an interesting catch to those wishing to join their system: if you're not financially capable of developing a minimum of five locations in a short period of time, you're not qualified to be their franchisee.  This is interesting and begs an important question: how many franchisor founders would have actually met their own brand's current franchise requirements back when they were starting out?  I wondered this while reading the article: would the founders of this burger franchise have been able to commit to and show proper equity for opening a minimum of five locations prior to them opening their first?  Maybe so.  But I suspect that some franchisors with minimum development requirements would not have qualified for their own brands when they first started-out.

Of course, many franchisors would much rather grow with an organization capable of opening multiple units in a compressed time frame. It may certainly be easier than dealing with the "onesies" and "twosies" of franchise development.

But aren't the "onesies" and "twosies" the real small businesses here?  Is it these small groups that best reflect the passion and will of the owners themselves?

These are interesting questions and the point is this: sometimes attracting "like me" franchisees means letting the "onesies" and "twosies" in the door.  Definitions aside, it's a simple small business decision...that doesn't necessarily require a 61-page white paper.

What do you think?  Let us know by commenting below.


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