Evaluating Franchise or Private Growth Options for Your Business

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1. Four main variables to consider when deciding to franchise or go private:
   • Cost versus Return on Investment (ROI) per dollar
   • Effort required to open a location (centralized or decentralized)
   • Scalability and potential for a big exit (exit strategy)
   • Entrepreneurial personality (promotion-driven or product-driven operational leadership)
2. Financial metrics to consider:
   • Top-line revenue per location: $500,000/year
   • Bottom-line net earnings per location: $250,000/year
   • Cost to open a location: $50,000
   • Return on Capital (ROC) for existing locations: 5x or higher
3. Franchise economics:
   • Franchisees receive 7.5% royalty on top-line revenue
   • Franchise valuation: 15x net earnings (Enterprise Value)
   • Private location valuation: 8x net earnings (Enterprise Value)
4. Scalability and growth considerations:
   • Franchise model: can open 10 times more locations with same effort
   • Private model: can open fewer locations, but with higher valuation
   • Exit strategy: consider franchising to achieve a big exit (e.g., 100 million-dollar exit)
5. Entrepreneurial personality and solutions:
   • Promotions-driven entrepreneurs may prefer franchising to focus on sales and marketing
   • Product-driven entrepreneurs may prefer private ownership to focus on operational leadership
   • Consider hiring support staff to address areas of incompetence
6. Checklist for evaluating franchise or private growth options:
   • Complete the checklist to evaluate your business considering the four main variables
   • Look at your business from an investor's perspective to make data-driven decisions

Source: How To Grow Any Local Business (My Framework), Alex Hormozi