What distinguishes a successful franchise or licensing concept that can look forward to decades of prosperous growth from those destined for mediocrity or bankruptcy?
: Two things. The most basic is that success requires an attractive return on investment at the unit level. No amount of money or financial genius at the corporate level can overcome the dead weight of stores that don’t return the investment required to open them. Compare, for example, Boston Market’s $ 4 Billion of investor’s money lost despite financial brilliance at Corporate with McDonald’s long term success. The McDonald’s stores work, Boston Market’s didn’t. The key equation ( one used by so few people it might as well be a “secret’) to use in analyzing any business or comparing two opportunities is: Return on Investment = (annual sales / $ investment) x % profit per dollar of sales >>This equation lays bare the basic key to success or failure. The second key to long run success is a system that encourages, supports and rewards the best franchisees for helping others to get into business. There are a number of different ways to accomplish this, including: 1) Subway’s Development
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