Okay, we've been talking about alternative sources of financing, and so now we'll talk about franchising. But before I get into the topic of franchising, let's refresh ourselves on the concepts of alternative financing. Traditionally, as a corporate entrepreneur, you're going to be looking for internal funds. That involves competing for capital expenditure budgets or operating budgets. CapEx budgets have a direct impact on a return on capital employed. And so, alternative financing sources are good to look for, if you're looking for financing for your project. These alternative strategies are beneficial because they are using, as I call it, other people's money instead of the corporate funds. And it can enhance the business model through new revenue streams or profit centers. So, there's a lot of different ways that you can accomplish this. You can leverage your intangible assets such as intellectual property, and trademarks, and know-how, and trade secrets. And you can also develop strategic relationships. So let's look at franchising now, as a source. Franchising basically shifts the financial responsibility away from the corporation and to the franchisee. And so the franchisee generally will pay for the right to use your intellectual property, your trademarks and probably your systems, if you have systems established. And they'll do that in exchange for this franchise fee, plus a continuing royalty on the products or service that you're actually selling to the franchisee. And over time, this can grow to a substantial value and the best example of that is an organization like McDonald's. The elements of the franchise include, [COUGH] There are several elements, right? Number one is brand. And the franchisee is able to kind of ride on the laurels of your brand, and it creates a degree of customer loyalty and builds brand equity. They also can access the systems and processes, meaning it helps them maintain the relationships that you have already established with your customers, and also helps build loyalty. And then you as a franchisor have to support the franchisee by providing them tools, and training, and tips on how to expand their offerings, and provide a way for them to grow their business. So why would we look at franchising as a way of financing a project? Well, there's economies of scale and there's operating efficiency. If you think about the fact that you're basically, the franchisee, is actually using the system that you've already built and established. They're accessing them, and so there's kind of economies of scale in that way. I kind of look at it similar to the way you look at, like if you rolled up a bunch of operations, and that you would not need to repeat or duplicate all of the selling and general administrative costs of the corporation at each franchise level. It also enables you to kind of rapidly penetrate the market by having a bunch of different franchisees out there at a fairly low cost. You can get some consumer reach, you can co-market with your franchisee. And you're basically replacing the need for internal people with owner/operators. And in many organizations, headcount's a big expense, and also is very difficult sometimes to get additional headcount approved. And again, as I said, you're shifting the financial responsibilities, a lot of the risk, away from the corporation to the franchisee. So they're good to look at. They're not for every project, but it's something you should remember is available, and if your project makes sense from the franchise standpoint, then you could pursue it.
