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Rubbish Boys

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Submitted By LHsu
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After the Rubbish Boys case, I discovered that using a franchising model to grow business seems to be a good option for “King” type entrepreneurs. Brian is able to keep 100% of the company all the way because the franchising model helps minimize the capital he needs to scale the business, therefore eliminates the need to give away equity for money. In addition, the one-sided franchising contract gives the franchisor security to hand the operation to another entrepreneur without worrying losing equity and control.

However, I think that Brain’s success was a bit of luck. Franchisees join a franchise business because they want to own a business of which the business model has been proven and tested, the revenue and required investment are more or less known, and ideally the existing brand equity can be leveraged to get the new franchise up to speed fairly quickly. In Rubbish Boy’s case, the company didn’t meet any of these criteria. Brian had just decided to switch from the student franchising model to a professional one, with the new pricing and operations untested; it was unclear how much the franchisee will earn and invest; and there was certainly no brand recognition at all. That was probably why Brian couldn’t find any franchisee to start with and had to turn to an internal management team member.

That being said, every franchisor needs a “pilot franchisee” to start with in order to successfully set up his/her own franchise model, and Paul Guy was Brian’s pilot franchisee. The pilot franchisee serves three main objectives: (a) Prove the franchise model works for this particular business. (b) Allow the franchisor to document an operation manual, giving the franchisor a better idea of the investment requirements and break-even analysis. (C) Demonstrate the results to other franchisees.

In Summary, my conclusion on how to set up a franchise business is as

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