How Licensing Strategies Can Help Expand Your Business Nationally without the expense and compliance of becoming a Franchisor
As a business owner, one of your main goals may be to expand your business to reach a nationwide audience. While franchising or opening company-owned locations may seem like the only options, a lesser-known strategy is licensing. By licensing your business, you can raise capital and earn profits, all while expanding your brand on a national scale. In this article, we’ll explore how advanced licensing strategies can benefit your business. We will highlight the real world example of iDealFurniture, which has successfully sold over 325 locations in just 8 years, that created millions in upfront profits and backend revenue on wholesaling products to the licensees.
What is Advanced Licensing?
Licensing is a business strategy whereby you sell the right to use your company name, logo, products, or services in a specific territory or market, while providing training, resources and support, Unlike franchising, that could cost hundreds of thousands in legal, marketing and compliance fees and years to get going, a licensing offering for an existing business model can start producing revenue in the first 60-90 days at a fraction of the cost of becoming a franchisor. Instead of receiving royalties, you receive a one-time upfront fee from each licensee, based on the population and size of the protected and in some cases exclusive territory. Besides selling operator licenses, you can also sell Master Licenses, which is in essence a revenue share business model based on all sales by operators in a larger territory. This is, in essence, more of a way to raise capital and create profits from somebody who wants to be more passive, but could still help you build that territory, since they are motivated with “skin-in-the-game”.
This approach blows away the do it all yourself, asset expansion process since it eliminates the need to finance, build, and operate company-owned locations, which can be extremely risky, expensive and time and resource consuming.
Benefits of Advanced Licensing
There are numerous other benefits and advantages in choosing licensing as a strategy to expand nationally. The first benefit is that you raise capital while simultaneously expanding your business. Your licensee pays a fee to receive the right to use your brand, and can be a substantial source of revenue. Additionally, your licensee assumes the cost, risk, and responsibility of setting up and operating their business. By using this licensing approach, you can leverage other people’s expertise and financial resources to grow your business without incurring additional expense or risks.
Case Study of iDealFurniture
The success story of iDealFurniture is a perfect example of the benefits of national expansion through licensing. I originally founded iDealFurniture in 1982 in Southern California and at one time built it up to 6 stores, but, it seemed the more stores I opened, the more I worked and the less profits I made, due to increased overhead and employees that came and went. Finally, in 2006, I met a licensing expert on the golf course, Mr. John Bellave, who taught me licensing and we partnered to sell over 325 licensed locations and we pocketed millions of dollars in revenue and profits. iDealFurniture provided its licensees with a turnkey business package, including logistics, sourcing of products, marketing materials, websites and training. In exchange, entrepreneurs paid iDealFurniture a one-time fee that averaged over $25,000 per location (based on territory size) plus we earned backend revenue by creating our own private label mattress company called Perfect Dreamer and became a wholesale furniture reseller.
In conclusion, licensing is an attractive and compelling alternative to traditional business expansion strategies. This approach allows business owners to raise capital, minimize risk and earn profits while expanding their brand nationally. iDealFurniture provides a great example to existing business owners by demonstrating that licensing can work on a national scale for any successful business model.. By exploring licensing, entrepreneurs may be able to realize their dreams of growing a successful business leveraging the capital and entrepreneurial skills of others willing to pay you for your expertise and training, but NOT giving up their independence (and monthly profits) to a franchisor.
My company, Advanced Licensing, LLC offers entrepreneurs a FREE Comprehensive Analysis on the viability and shoestring costs of taking your company national. Feel free to reach out via email at: info@AdvancedLicensing.com (att: Larry Kozin) or call me on my cellphone: 702-622-7051
