In Show Show 147 – Education – Phase 7 Expansion, franchising and licensing originally broadcast on Youtube Live on Wednesday 7 November 2018 we explore this interesting topic.
You can download a copy of the workbook here: 147 Worksheet
Expansion, franchising and licensing. If you’re looking at any or all of these things that’s great news. Your business is flourishing and now you want to grow even more. But deciding how to accomplish that is no easy task. Each of those three options can be extremely complicated to achieve. Today we’re going to talk about each of those three options. They fall under Phase 7 of the Business Legal Lifecycle. Remember that you don’t have to expand. But if you decide to do it follow these steps closely.
There are a number of ways to expand your business. You could hire new employees or buy a new piece of equipment. Or you could expand into an entirely new market by purchasing another business. Here are the things you need to have in place before you take this big decision.
If you haven’t planned out the expansion you are going to be in trouble. Planning can mean everything from how the business will operate in a new location to ensuring you have the right tax structure in place. Whether it’s the first time you’ve expanded or the 20th the same things have to be considered.
2. Fixing problems
Any problems you have now are going to get worse as you expand. If you have cash flow problems now it’s going to be even harder after expansion. You have to solve your current problems now before you can even think about getting bigger.
You ‘re going to need more employees if you get bigger. Different people means more complications. You need to carefully think about who you are hiring and how they are going to work with your current staff. Communication between your new and old staff will be critical to your success.
4. Mergers and acquisitions
One of the most common ways to grow your business is through a merger or an Acquisition. Mergers and acquisitions are terms that are used interchangeably but they are actually quite different. A merger occurs when two companies decide to combine their businesses into a new entity. An acquisition, on the other hand, takes place when one company buys another outright. The advantage of using mergers and acquisitions is gaining a firm that has already been operating successfully. You can acquire the structure and market share of that company overnight. That said you need to get advice before heading down that road.
Franchising and Licensing
The franchise model was developed in the United States and other Western countries to allow entrepreneurs to expand a business by essentially leasing the intellectual property to another operator. The IP and branding remains under the control of the original businessperson while the new business is operated by the franchisee.
The Franchising Code of Conduct details how the relationship between the franchisor and franchisee should operate. If you fail to live up to those standards there could penalties. Royalty fees will be paid to the franchisor each month and there are other fees during the start-up phase.
You can download a copy of our outline for an operations manual here.
Licensing, meanwhile, allows another businessperson access to your IP and branding. The difference is that the original owner maintain very little control over the new business. If you are going to license your IP to a new business but demand a lot of control over that new business you are actually a franchisee. You can be liable for any disputes in the future. It can be tempting to get around the franchise fees by using a license but that is risky. You can end up paying a lot more in penalties.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.