ďHave you licensed a company before?Ē
Yes, but not successfully. The licensee didnít need me once he was set up and going - after wasting a lot of time in discussions and re-negotiating, he changed his company name and pressed on. And heís doing well. I would have been better off getting paid as a consultant for helping him set up his business.
Itís not all his fault. Initially, I brought a lot to the table Ė my expertise and experience. He needed that and was willing to pay for it. However, after he got going, he realized that I was no longer contributing value to his business, but I was getting paid anyway.
A national franchise brings a well-known name that has been marketed extensively Ė I didnít have that. They also bring volume discounts for products Ė I didnít have that either. Once I introduced him to my suppliers, he was able to open an account and get the same prices as me. Another thing they bring is contracts from large corporations that they are servicing across the nation. That was another thing in a long list of things that a successful franchisor brings to the table that many small players like myself simply donít; and canít.
If I did it again, Iíd just go the consultant route; or Iíd figure out a way to make myself so valuable to the business that the thought of doing it without me would be unthinkable. In the early stages, itís easy to do, but it gets more difficult as the business gets on its feet and the licensee becomes more independent. That is, the licenseeís business HAS to be better with you than without you, which is a no-brainer in the early stages, but once he knows everything that you do, how are you going to contribute a substantial enough of a value that he canít or wouldnít want to do it alone?
Anyway, I think thatís the main stumbling block; however if I had that figured out, Iíd have locations across the nation by now. So, as is most often the case, Iím more help in learning what not to do, then what to do Ė I could be a poster boy for business mistakes. Thatís where my real expertise lies. If there is a mistake to be made, rest assured that Iíve made it more than once.
If you ever do get sued or get involved in a lawsuit, I can provide you some doís and doníts Ė Iíve seen jury trials through to the endÖitís rarely pretty. And thatís why I mentioned that the legal enforcement of agreements is rarely worth the effort and expense. So donít plan on your agreement and the threat of litigation keeping the licensee in check because it wonít. You have to bring irreplaceable, long-term value to the table for licensing to work.