McYou

Check the Competition

Ask whether the world really needs another sub sandwich shop, or why someone would want to gold-plate his or her widgets your way. Your best bet, assuming you don't have huge amounts of cash to throw around, is to find a niche that's not already overwhelmed with franchisors. You may make the best hamburger ever, but-news flash-hamburgers have already been done.

The niche could be a different product, or you could franchise a fairly standard product in smaller markets where the big boys don't bother to go. Either way, if you're extremely fortunate, you might be able to sell a handful of franchises in the first year. That means, if you watch your costs, you might be able to recoup your investment in preparing the manuals, offering circulars, brochures and training programs. You must be ready for the long haul. Although franchise growth can be exponential once you've established yourself, those first 25 franchisees will be the toughest to earn.

Establish a Growth Strategy

Read What to Expect When You're the Franchisor for more information on this growth strategy.

Your first franchisees will likely be within your immediate sphere of influence, so keep franchise brochures on the counter at your stores. But keep in mind, a fast way to kill a new chain is to sell franchises without any cogent plan for growth. New franchisors are often so eager, they're prone to sell a franchise to anyone who's interested. Then, when it comes time to provide support to one unit in New York, one in California and one in South Dakota, the franchisor is forced to exhaust its resources merely doing what it promised.

Accordingly, in the absence of an expansive budget, strong chains grow in concentric circles so brand names gain recognition in specific areas, marketing dollars can be combined for better market penetration and economies of scale are created. Even then, you'll be required to add operations and sales support personnel as you grow, while you keep a very close view of your cash flow.

You have a better chance if you have a record of profitability that stretches back a few years and have made the effort to systematize your operation.

Good Fortune
THE NUMBER of franchises in the Asian fast-food industry nearly doubled in the past year. How does that compare to other food segments?


SOURCE: Entrepreneur's Franchise 500, 2001, 2002

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This article was originally published in the January 2002 print edition of Entrepreneur with the headline: McYou.

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