Putting It All Together…On the Path to the Next Phase (4)
This is the fourth set of the wrap-up exercise I embarked upon four weeks ago with my Billionaire Friend. My meeting with him four weeks ago was a short one: it was essentially a review session, and we went through the entire project and looked at the feedback from the readers. My friend confirmed we needed to move to the next phase but that would require a recap of what we have done so far to put people in the picture again. So here is the fourth set of recaps. Enjoy.
BUILDING WEALTH, NATIONAL SECURITY AND FRANCHISING
Wealth and National Security
- “National security is essential to wealth building and sustenance because wealth creation only thrives in peaceful environments and nations. It relates to direct threats to the physical well-being of the population and jeopardises the stability of a country, its economy and institutions.
- National security threats could show up in incidents of hostile government takeover —terrorism, the proliferation of weaponry and stockpiling of chemical weapons — which can destroy any nation’s security. It also includes cybercrime and infiltration by hostile governments and terrorist groups. Cybercriminals have hacked economic institutions, government websites, private bank accounts and national power infrastructures. National security could also be adversely affected by natural disasters such as hurricanes, earthquakes and the likes of the Covid-19 pandemic’s recent occurrence. National security is therefore crucial for providing a conducive environment for the funding or hindrance of wealth creation, building and sustenance”.
- “It is important for governments to put national security and emergency responses in place, to allow them to identify and thwart human-made destructions to national peace and stability, which would go a long way in promoting business and wealth-building activities. Nigeria is currently witnessing several violent attacks, kidnapping, banditry, farmland invasion by herdsmen and inter-communal tensions, leading to outbreaks of violence and disruption of economic activities and wealth building. The outcome of all this is the high rate of unemployment in Nigeria and its attendant effect on social tensions and strife. Domestic capital formation is also hindered and foreign direct investments are affected. Meanwhile, government spending on education and security is low, which has negatively affected the level of security and retard national economic growth”.
- “One way is for wealth builders to always be pre-emptive, to insulate themselves strategically from the impacts earlier mentioned, by employing insurance policies to reduce the probability of losses.
- “It must be admitted that the problems of national security are universal but the difference between one country and the other, in terms of wealth development, incomes, earning capacity, size/quality of GDP and employment generation capacity, has to do with how effectively and optimally that national security is handled for providing conducive environments. Also of importance is the need for the empowerment of the country’s judiciary, for fast, adequate and unbiased judgments against infractions, and clear and transparent penalties against the perpetrators of security lapses. This is very important because every properly-managed nation is fully aware that lapses in national security can, and do occur, and negatively affect growth and development. Well-managed nations generally appoint their judges on merit, empower and fund their judiciaries and honour the sanctity of the rule of law. These are necessary ingredients for the growth and development of wealth in well-managed societies and nations”.
Building wealth through franchising
- “Franchising is a form of business enterprise for building legitimate wealth through the acquisition of a licence to do business with the brand and/or trademark of a company by an individual or group of people, to enable them to carry out some specified commercial activities in the name of the issuer of the licence. Franchisees are usually people with some capital, either borrowed or accumulated, who want to own their business but do not know much about how to start. In a franchise arrangement, a wealth builder can enter into a business relationship in which the franchisor allows the franchisee to sell his products, services and intellectual property in the franchisor’s registered trade name and brand”.
- “Buying a franchise generally reduces the risk of freshly going into some unknown business terrain. However, it still requires and involves lots of hard work and commitment of franchisees to ensure their success. Therefore, wealth-builders need to ensure that the businesses for which they obtain franchises are those that they have an interest in and about which they can see themselves enjoying doing on a day-to-day basis. This requires wealth builders to carry out some business overview, investigations and research before seeking to obtain franchises, to ensure that their franchise business is one in which they have interest or passion and management expertise”. Franchising is usually used as a means of distributing products or services involving the owner of such products or services called a franchisor, who has an established trademark for a business system that enables a franchisee to pay royalties and often an initial fee for the right to do business under the franchisor’s name and management system”.
- Opening a franchise involves a relatively low risk of doing business because of the presence of full support of the franchisor. Franchisees must be fully aware of overriding regulations and contents of the agreements reached with their franchisors and must factor into their operations what would make their franchise successful. Usually, franchisors issue franchise licences as a way to expand their businesses and create widespread branches in a way they could not have achieved on their own. Thus, franchisors seek out wealth builders to help them expand and grow their businesses through franchising at a minimum cost. On another end, franchising allows franchisees to benefit from the opportunity to run their businesses with the licence and support of franchisor companies”.
- “Franchise business arrangements have globally proven to be successful for wealth builders, with little know-how about the line of business of their investment interest. Hence in a franchise arrangement, one does not have to worry about building a recognised and trusted brand, developing well-trained support teams, and finding reliable advisors to help them to manage their businesses. The franchisor provides all these in the franchise arrangement”.
- BUSINESS FRANCHISE
“A business franchise allows franchisees to pay franchise fees and get the system developed by the franchisor with the right to use the franchisor’s name for a specific number of years, which is usually spelt out in the operating franchise agreement.
The business franchise is the most common type of franchise, which allows wealth builders to buy the licence to businesses with established brand names. Such wealth builders’ new franchise businesses would often be supported by the category of the franchise throughout the initial stages of business. Such support may continue to be extended throughout the life of the franchise businesses. In return for this business support, franchisees will be exposed to having access to experienced professionals and the right to use the brand name of the franchisor. The franchisee is however obligated to pay royalties to the franchisor regularly as per the agreement reached between both parties. The best example of this class of franchise arrangement is found in the fast-food industry. The global example of this class is Kentucky Fried Chicken and McDonald’s. The Nigerian examples include Tantalizers, Tastee Fried Chicken, and Chicken Republic. These franchisors allow franchisees to use their trademarks and brand names and take advantage of the economics of their supply logistics and the secrets behind their menu of foods. This arrangement sometimes requires the franchisors to continuously train their franchisees to ensure the maintenance of famed products and services of top quality in line with the franchisor’s standards. They may also guide their franchisees with internal audits to help block income leakages. Marketing expertise is provided chiefly to franchises to optimise franchisors’ profitability, business expansion, enhanced business images, etc.”
In total, this arrangement benefits both the franchisee and the franchisor. It is highly recommended for newly retired employees who do not have business ownership experience to take advantage of the available franchise support system to start good businesses of their own.”
- PRODUCT OR SINGLE OPERATOR FRANCHISE
This franchise focuses on giving out franchise licenses to individuals who sell products and delivery services in specific fields. The franchisors in this arrangement allow franchisees to use their brand names and trademarks, provide them with uniforms and equipment to properly represent franchisor brands and provide support to franchisees to deliver products and services to third parties. Product franchises are an excellent option for start-up wealth builders, independent contractors and home businesses. The investment outlay needed under this franchise class is usually smaller than that of the business franchise. Examples of independent contractors’ franchises are companies that have already established good names and reputations for their contracting services in their field of work and issue franchise licence to franchises.”
- MANUFACTURING FRANCHISE
“Manufacturing franchises are the third classification of franchise arrangements. In a manufacturing franchise, the franchisor allows the franchisee to produce products and provide services using the franchisor’s brand name and trademark. This type of franchise is very popular with food and drink companies in the manufacturing industry. The best example of this franchise is with soft drink companies. Here, the parent company would produce a concentrated syrup and then sell it along with the right to use its brand and trademark to a bottling franchisee company which would mix the syrup with various ingredients and then sell the bottled drinks. An unlimited choice available to wealth builders who still feel very passionate and ambitious after building their franchise businesses to successful levels, but want to expand to other locations or other businesses, is to simply retain control of their existing franchise and continue generating profits from them while expanding to other businesses outside their franchise.”
- “Indeed, franchises of all classes have many advantages over other entry strategies for new business builders, who have problems and difficulty coming up with original ideas about which business to engage in. The first advantage of franchising is instant brand recognition. When wealth builders start businesses of their own, they have to build their brand recognition from the start. This is usually difficult at the beginning, especially with business builders who have to compete in areas with existing strong competitors. In such places, it is better to enter into business as a franchisee of an existing strong franchisor. Under that arrangement, the franchisee business builder will use the logo and brand power of the strong, existing franchisor to attract loyal customers and generate good revenue and profitability. The second advantage is the corporate support provided under franchise arrangements for start-up business builders. This is so because most corporate franchisors go out of their way to succeed and thus, give strong support to their franchises to ensure their success too. We must not be unaware that business builders starting their businesses for the first time would most likely go through tough times because they are entering unfamiliar terrain. The corporate support provided by franchisors also includes providing classes and training workshops to ensure that franchisees know how to better open and manage their businesses. The franchisors also provide some mentoring, coaching and consultancy for their franchises. The power of the franchisor’s entire brand, therefore, grows appreciably for his ultimate benefit”.
- “A big advantage of franchising to wealth builder franchises is the strength and benefit of a continuous flow of revenue during the lifespan of their business. This is the biggest advantage of franchises as a business for wealth builders. Once franchise owners can run their business well and get comfortable with their location, they can continue to collect monthly revenue above their expenses, thereby resulting in profits that should grow over time.
- Another advantage of franchising as a business arrangement for wealth builders is flexible responsibilities. Being franchise owners, wealth-builders would be confronted with many responsibilities. However, once the business of their franchisee has gathered some momentum of its own, then the franchisee would be better able to control their responsibilities. Before then, the franchisee’s responsibilities are shared flexibly to minimise the risk exposure of the franchisee of their businesses. Franchisors in some cases help to hire managers and other professionals for their franchises to ensure the delivery of high-quality franchise arrangements.
- “However, you must be warned that franchising is not all bed of roses, as some problems may arise and constitute low ends for franchise businesses. The first of these is start-up cost. Most franchises require huge initial investments which may not be easily available to many start-up wealth builders. Hence, franchise businesses may not readily be available to wealth-builders with small capital. Indeed, franchising generally requires good access to capital for its success, which is most often obtained through bank loans, equity contributions or cooperatives. However, if capital is obtained via bank loans, as against cooperatives, equities or relying on accumulated savings of some years, such franchises could be exposed to economic and high-interest rates, especially in countries with a high cost of capital, such as Nigeria. This is one low end of franchising as a viable form of wealth building.
- “High inflation rates are part of the problems of franchise businesses in Nigeria. As of today, the survival of many franchise businesses is threatened by the high cost of diesel, high inflation in the input costs of raw and packaging materials for business operations and the poor quality of human capital in Nigeria. The bad geographical location of a franchise business can be a sure way to failure.”
- “You should not assume that franchising is a no-danger form of investing for wealth builders. An important threat to wealth building through franchising is the problem of corporate restrictions. This arises when franchises are entered with franchisors with the weakness of high control wielding over their franchises. A franchisor who wields too much control over his franchises would end up destroying the franchise business arrangement. Hence, franchisees must ensure that the franchisor with which they intend to deal are those with friendly corporate control over their franchise. Therefore, owning and operating a franchise business under a franchisor has immense overall advantages and is a viable source of owning a business for wealth builders. However, it requires thorough investigations, pre-training and basic talent for such franchise businesses to succeed. It also requires proper investigation of the franchisor’s control over their franchises, finding out the level of assistance franchisors give their franchises as compared to other competing franchisors. Franchise volatility, corporate rules and high cost of entry may also be a put-off. Notwithstanding all these, there are enormous advantages of franchise ownership that wealth builders would need to explore to own and operate their business enterprises, especially those wealth-builders with relatively low capital but with high talent and interest in the areas, they intend to venture into.”
We stop here for this week. I can’t wait to catch up with you next week.
National security is essential to wealth building and sustenance because wealth creation only thrives in peaceful environments and nations. It relates to direct threats to the physical well-being of the population and jeopardises the stability of a country, its economy and institutions.
Franchise business arrangements have globally proven to be successful for wealth builders, with little know-how about the line of business of their investment interest. Hence in a franchise arrangement, one does not have to worry about building a recognised and trusted brand, developing well-trained support teams, and finding reliable advisors to help them to manage their businesses.