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Is This Business Ready to Open a Franchise?

Josh Skolnick, whose Monster Tree Service opened n 2009, with 15 employees, has an annual revenue of more than $2 million. If the company is to continue to add 35 percent in sales, it needs new locations. One option is to open a second company-owned business, which involves opening, staffing, and outfitting. This would create a new debt of over $500,000, which should be repaid from operation profits. Another option is franchising, which involves trust as well as set up costs of $100,000 or more and paying the salary of a full-time director off franchising. It could take up to 20 operating franchises and two plus years, before earning back the investment. While studying the options the owner brought in franchising consultants: Burton D. Cohen & Associates, determined that the owner “is a driven, successful social entrepreneur who has also demonstrated the ability to manage a multi-state mulching business… he should have no trouble opening another location.” Franchise Chatter also advised opening a second location to keep from having to develop a new skill set and leverage operational experience, before shifting his focus to franchising. Susie Cakes Bakeries, with eight company-owned locations in California, agreed with the others, saying, “He has not yet proven success in a secondary market, nor built his infrastructure to support a satellite operation. I believe too many companies choose to franchise before they are large enough to attract multiunit, sophisticated franchises.”

  1. Check out Monster Tree Service (http:www.whymonster.com) to see what Josh Skolnick decided and what the outcome was. Did you make the same decision?
 
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