Taras Financial | Sell Royalties & Scale up to Success
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Sell Royalties & Scale up to Success

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08 Jan Sell Royalties & Scale up to Success

McDonald’s, Subway, KFC, Burger King, Pizza Hut. These are the 5 largest global franchises in the World. Unsurprisingly, they are all from the same country, that is the USA.

 

Out of the first 100 global franchises in the World, the following list shows how they are distributed by country.

 

GLOBAL TOP 100 FRANCHISE
Country Total Franchises
USA 79
France 6
Spain 5
Canada 4
Australia 2
Germany 1
Japan 1
Sweden 1
UK 1
TOTAL 100

 

 

So, what does this mean in terms of economic output?

 

On its own, the franchised economy is worth an output over $1 trillion each year to the US economy. To put things in perspective the UK franchised economy has an estimated output of $18 billion and the total GDP is $2.5 trillion (US GDP is estimated at $17 trillion).

 

So why is this phenomenon so much larger in the USA than in Europe?

Why are exit plans so much more advanced in the USA?

Why are US companies on average worth more than apparently equivalent European companies?

 

Quite simply, this is one of the reasons why Europe’s economy may keep lagging behind if we do not address a fundamentally great potential within our economy: Intellectual Property with the potential to generate royalties.

 

Back in 2016, during our 4 speeches with the UKTI, we addressed that there are essentially 3 types of growth:

 

  • Bad growth. This happens when the business does not generate a cash flow that is adequate to its growth rate and it has no succession planning. A LOW VALUATION is the result of this growth
  • Good growth. This happens when rising sales are matched with rising cash flow and as a CFO we do this by addressing cash management, cost and margin controls, succession planning. A FAIR VALUATION is the result of this growth
  • Great growth. This happens when an investment is made to establish intellectual property as a key cash driver into the business. This allow the generation of royalties which are the ultimate success for a business owner. A great example is the UK pop music industry and obviously the US economy as a whole. This type of growth generates the HIGHEST VALUATIONS.

 

So dear business owners in Europe, what type of growth is your own business experiencing?

 

Intellectual property can indeed be your true goldmine. Last year I had a client who invested in dozens of patents but the pricing strategy was wrong. By applying the correct pricing strategy and setting up the business to sell royalties, the estimate future market value of the business was set to increase by 1,000%.

 

What kind of business can generate royalties?

 

The list is vast and varies from education to construction, medical equipment, sport activity, food, professional services and many more……effectively the majority of businesses can generate royalties!

Are you now ready to discover your goldmine in 2017 and beyond?

 

We are privileged to work with partners who are experienced to service such clients are Reebok, Swatch, Nestle.

 

Email me your thoughts on this article at matteo.turi@thefdcentre.co.uk or call me on 020 3287 1055 if you wish to discuss further on how we can scale up your business to financial success.

Matteo Turi FCCA
CFO, Expert in Scale Up and Exit Plans
The FD Centre UK

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