PHOTO BY PIXABAY
DOMINATION:
Creating Wealth through Franchising Franchising has several advantages over more traditional business models. By Holly A Ford
G
enghis Kahn was the first Great Khan of the Mongol Empire, which became the largest contiguous empire in history. Genghis Khan and his imperialistic conquests were riddled with brutality and genocide. However, he forbade the selling and kidnapping of women, banned the enslavement of any Mongol, ordered the adoption of a writing system, and allowed freedom of religion—a heretical move at the time. Genghis Khan once emphasized, “One arrow alone can be broken. But many arrows are indestructible.” This powerful conqueror knew that to preserve the Mongolian empire he must, at any cost, expand it. 34 FRANCHISE CONNECT | JUL-AUG 2020
Now, transition to the 20th century and enter the business emperors or Kahns: Ford, Singer, and Kroc. These new Kahns proved the power of franchising as the most viable method of expansion. EXPANSION IN A RECESSED MARKET It wasn’t so long ago that acquiring capital for a cannabis business was a relatively uncomplicated transaction. However, like all high-risk, high-reward enterprises, the pendulum swung. Enter an era of overprojections and under-performance. Ample capital was invested in the new industry, only to find a legal jungle, choke holds on vertical integrations, and a slower than expected nationwide adoption of the schedule 1 controlled substance. Venture capital, hedge
funds, and even family offices are no longer making it simple for the players looking for growth in the cannabis space. Raising capital for expansion is one way to grow, albeit limited. A more expedient, deeper penetration method is via the proven route of franchising. See the following seemingly successful case study: A company enters into seed round for 1mm and successfully launches business. Working capital is scarce and expansion is inhibited, so the company raises capital through a series A round. This works to grow the business to its second location and possibly third and fourth. The company is still not EBITDA positive, and growth again is restricted by funds. The company treads into Series B and raises the round to now move into multiple states. Success? At best, the owner(s) of
