How to Start a Business on Amazon » Succeed As Your Own Boss

SmallBizLady: How do you decide when it’s the right time to franchise a business?

Alicia Miller: Franchising is a brilliant expansion strategy. Franchisors use other people’s capital (franchisees) to add units. The franchisor then collects royalties from the efforts of its franchisees. If franchisees are successful, the brand can continue to grow. But franchising is not for everyone! There are three things to consider from the start: Sometimes, great local businesses succeed because their founders personally put so much energy into building their team and offering. But what they do every day hasn’t gelled into something they can teach to others. For example, they might run a popular local restaurant that has an innovative and ever-changing menu. Franchising is all about duplication and systems. So the same customization and personalization that can make a small concept popular may not be scalable within a franchise model. Think about how your model could be replicated by others.

SmallBizLady: Is it expensive to franchise a business?

Alicia Miller: Launching a franchise and building it to the point where royalties collected cover corporate expenses is expensive! You will spend at least $150,000 for just the basic documentation, legal reviews, and registrations. You need to hire staff to support franchisees and will pay to market and sell your franchise concept. Franchisee recruiting especially has become highly competitive. There are 4,000 active franchise brands in the US. Around 400 new brands launch each year. It’s noisy and difficult to get attention! If you use outside salespeople or brokers to help grow your footprint, 80% of the initial franchise fee you collect will be paid back out in sales commissions. So it helps to be well capitalized. Waiting until you have a few more corporate-owned units can be helpful. Those corporate units allow you to further prove out the model. The cash flow can help fund support and marketing expenses. Most franchise concepts will not hit the point of “royalty self-sufficiency” (the point at which royalties collected from franchisees cover all corporate expenses) until they have sold at least 50-75 units. If you’re under-capitalized, you won’t make it.

SmallBizLady: Should I be a franchisor?

Alicia Miller: This is an important question! Once you launch your franchise business, you no longer run a restaurant, salon, dog boarding facility, or whatever your business concept is. You’re now running a franchise company and your job is to sell franchises and support franchises so the brand can continue to grow. Not all founders enjoy that transition and miss the days when they were just running their small business. Make sure running a franchise system is something you really want!

SmallBizLady: What makes a franchise successful?

Alicia Miller: 1. Units are profitable. Great franchise concepts have an operating model that allows franchisees to make a solid return on their effort and capital expenditure.

2. The concept is special. Is the experience, products, and services unique or easy for competitors to copy? There needs to be something different and valued by customers. That difference needs to be defensible in a competitive marketplace.
3. Customer demand is resilient. Markets go through cycles and fads come and go. Great franchise concepts have long-term sustainability.
4. The operating model is teachable. Franchising is about repeatable systems and processes that when executed correctly create good unit level profitability.
5. The system can adapt. Change is part of our modern world. It is inevitable that the operating model and brand will need to adjust over time. At the heart of a great franchise brand is a strong franchisor/franchisee relationship. There should be good communication and a willingness to work together to manage through changes needed for the long-term health of the brand.

How to Expand Your Business to the Global Market 

Thomas Young is President and CEO of the World Trade Center Greater Philadelphia (WTCGP). He gained more than a decade of comprehensive experience in legislative affairs, policy advising, and public engagement during his tenure at Bellevue Strategies. Thomas’s background encompasses significant involvement in diverse political campaigns, notably Ken Lawrence for Montgomery County Commissioner, Donna Bullock for State Representative, and Lynne Abraham for Mayor. Thomas holds a Bachelor’s Degree in Sociology from Indiana University of Pennsylvania, where he played basketball and earned All-American honors, leading the team to the Division II National Championship game. His passion these days is helping Philadelphia area businesses export. For more information, www.wtcphila.org 

SmallBizLady: What is the World Trade Center Greater Philadelphia? I thought it was a building.

The World Trade Center Greater Philadelphia is a 501c3 member-based nonprofit organization. Our purpose is to foster business growth and prosperity through global trade. We support local companies across various industries and sizes through a variety of international trade programs and partnerships to promote economic development for the region’s business community. Something for your listeners to keep in mind as they look to expand internationally is a “think global and act local” mindset. That’s at the core of what we do—working with companies to leverage local resources at home and on the go in markets around the world. For instance, being a WTC Greater Philly member gives you access to the network of 320+ WTCs in 90+ countries. We’re also the commonwealth of PA’s regional export network partner, connecting companies to the state’s network of in-market trade reps who cover 40+ countries.

SmallBizLady: What advice can you share with a small business owner who wants to expand internationally but is unsure how best to start?

Thomas Young: Over 95% of consumers live outside the US! Think about the opportunity that brings for the many entrepreneurs like you out there who have great stories and products to offer the world. It often starts with making the commitment at the leadership level to pursue these opportunities and rallying your team behind them. We’ve also seen a lot of companies make mistakes by not doing their homework up front or by taking on too much too fast. Make sure you’re prepared for what’s needed locally (regulations, translations, cultural differences, etc). Build up your strategy and Go to Market one step at a time, continue to expand from there.

SmallBizLady: Can you elaborate on some practical ways to do that?

Thomas Young: Getting back to acting local…Identify your local resources at home and simply reach out. Like your local WTC to see if they have trade membership options. Alongside government programs in your area – PA’s is a great example. Remember to also tap into your own network, and within your industry. Think like-minded executives already having success abroad. Industry trade associations are often great resources too.

The last thing I’ll add is about collaboration and connection. Pick your partners wisely and invest in building and supporting those relationships. One of the best ways to do that is by visiting their market – it goes a long way. Show curiosity and excitement to learn and have fun with it too!

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