Franchise Operations

Franchise Business as a Time Machine

At a recent start up event in her community, Katie was the only person who raised her hand when a certain question was asked, and it was a surprise for her.

Start-up events are becoming more and more popular in communities across the nation. These events, which range from meet-ups at a local watering hole to fast-paced weekends with star speakers and well-filled swag bags, give new business owners a chance to network and to learn.

Katie took copious notes, got inspired by the dynamic speakers, and was impressed by the amount of funding some of the entrepreneurs in the room had received. She listened to other business owners talking about deals they had made and plans they were working on, and she eagerly drank in all the data they shared.Then came the surprising question.

“How many of you have revenue?” a speaker asked. He had been talking about financing and taxes, subjects Katie had quite a bit of experience with, but she was always ready to learn. This question, however, surprised her enough that she wondered whether she had misunderstood it.

Still, she raised her hand. She owned a franchise business, and while it was new and she worried about cash flow more than she’d like, she did of course have revenue. She owned a business. Its doors were open. People came in and bought things. As Katie looked around the room, though, she saw that she was the only person whose hand was raised.

It’s important for franchisees to realize that they will have some time between when the franchise agreement is signed and the first paying customer comes through the door. Finding a location, building or remodeling, hiring workers, and training in the system all take time, and opening day can be a long-awaited occasion.

Even franchises that can be run from home or a small office or a mobile location require some preparation. Training, hiring, marketing, and sales all take time, and gaining momentum isn’t always a quick process.

But opening day for a franchise is usually very quickly followed by revenue. When you open a business with a recognizable name, people have clear expectations about what you’re offering, and they often respond with, “Hey, we’ve got a Ritter’s now!” — not, “ClarityTube? What the heck is that?”

Independent start ups, no matter how much capital they’ve raised, often have to spend months or even years building the brand: making sure people know what their company has to offer. Sometimes they spend months or years just figuring out for themselves what their company has to offer. They spend time creating prototypes, figuring out sourcing and packaging, designing visual representations of the brand, and identifying their value proposition.

A franchise has all those things built in. It still takes capital, work, and marketing, and it still takes time to become profitable, but you can skip a lot of the parts of the business that come before revenue, because the franchisor already did those things.

At the after party, Katie was chatting with one of the speakers. “A lot of start up companies,” he said, “are missing one key thing.” He paused dramatically, but Katie knew just how she’d finish the thought.

“Customers!” she said.

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