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Two Paths To The Dream Of Business Ownership

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A record number of American adults, 13%, are involved in the startup economy.  Many more dream of participating and believe they can be successful.  The popularity of the hit series, The Profit, hosted by Marcus Lemonis, attests to the enduring popularity of this dream.  Each week, he helps struggling businesses with high potential “get it right” by reformulating their recipes – that is, getting the right mix of “people, processes and profit.”

A recent episode, “My Big Fat Greek Gyro,” showcased that there are two common paths to business ownership in America – the startup and the franchise.  Most reality-type TV shows focus on the first path, but the majority of the jobs and wealth often come from the much less glamorous second road. These paths are complementary, as they require vastly different personalities, risk tolerances and creativity.  This is good for all of us, as these characteristics are distributed in different measures in our population and thus we all can potentially enjoy the benefits of ownership.

The Two Paths

The first path is for those that, through creativity, vision, trial and error and a good dose of luck, create an initial recipe for success.  Once success is achieved at a one-off location, entrepreneurs often try to duplicate their success by franchising – selling their hard-developed formula to others to duplicate.  The franchise buyer is, in a sense, buying the surety that the formula will work and that they won’t be required to be too creative or to face too much trial and error.

Where the second path, franchising usually breaks down (as it did in this episode of The Profit), is around both the support the franchisees get as well as the quality of the passing down of the original winning formula – that is, the mix of people, processes and profit that made the original work.  If the cookbook isn’t clear and communication is muddled, the franchisee will flounder.

The Franchise Cookbook

The good news is that there are proven, innovative platforms and approaches to capture how a business should operate that have been widely used at the enterprise level for more than a decade.  These high end platforms are rapidly finding their way into the world of franchising and have the potential to radically lower the failure rate, for one, but also to increase the number of businesses that can be successfully franchised.

So what has changed? If I were looking to buy a franchise today, I would demand to see a sample of their recipe, and I would expect to see it in a modern tool.  If I couldn’t understand or follow the “cookbook,” I’d pass on the opportunity.

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