About 18 months ago I had two separate conversations, one with a
franchisor founder, the other with a private equity firm. They each
lamented the other's lack of understanding of their needs. The
franchisor lamented that the capital markets did not understand the
dynamics of franchising, and their evaluation methods, reporting
requirements and valuation methodologies did not fit the sector.
The private equity director expressed frustration at the lack of
investment readiness of many franchise companies, and the
difficulty of assessing the value of and managing companies where
most assets were intangible.
They were both right. Entrepreneurial businesses do need to be
cut a bit of slack in the non-critical areas, as otherwise they
will become bureaucratic rather than entrepreneurial. Management
needs to be focused on running the business, not just reporting and
governance. But at the same time entrepreneurs need to make their
businesses genuinely investment ready, and
