From the April 2007 issue of Entrepreneur

In a previous column, I wrote about the CEO I brought in to take my company to the next level. After hiring an expensive staff of senior managers, the CEO's next idea was to take business away from our strategic partners. He intended to terminate one of our joint venture agreements and hire about 100 people to replace our partner. I personally don't like growing a business by hiring more employees and acquiring more office space--it's too expensive.

That leads me to this month's lesson: A person with an employee mind-set tends to expand a business by hiring more employees. Our former CEO was a highly paid employee who fancied himself an entrepreneur. Because he had the mind-set and values of an employee, his way to expand my business was to hire more employees and managers and increase office space.

After he moved on, I took back control of the business, rehabilitated some damaged relationships and began expanding the business in a more efficient and cost-effective manner. Instead of employing more people, we are expanding by selling businesses via franchising. With this method, we get paid to have people work for us rather than paying employees.

Here are four reasons we chose to grow by franchising:
1. People were asking us if they could be franchisees.

2. We have a worldwide brand and get requests from around the world from people and companies who want to do business with us.

3. Because my business teaches people to think like entrepreneurs and investors, it would be incongruous to have people who think like employees running our offices.

4. I like having people who want to work for my company and are willing to pay me, rather than the other way around.

Obviously, there are drawbacks to franchising, including the fact that the most contentious legal disputes are often between franchisees and franchisors. If you are interested in creating a franchise model with your business, I suggest two things.

  • Talk to someone who owns or has created a franchise.
  • Hire someone with franchise experience to guide your operations from the inside. A franchise system is a different breed of business with a different set of challenges.

Franchising can be a cost-effective way to expand a business--using other people's money (OPM). More on OPM next month!

Robert Kiyosaki (www.richdad.com), author of the Rich Dad series of books, is an investor, entrepreneur and educator whose perspectives have changed the way people think about money and investing.