Franchising Principles Applied to Startups

Make yourself completely replaceable – not essential.

I had the opportunity to visit with a franchise president who is also doing a “conventional” tech startup.

I read The E-myth Revisited years ago, and it dramatically changed my way of thinking about business. The premise of the E-myth is that the entrepreneur should *not* be essential to the business and that the entrepreneur should put systems in place so that they are not needed at all. Their knowledge and expertise should be rolled into processes, procedures, and systems that capture the entrepreneur’s knowledge and expertise. Then, the business functions without them.

In essence, the E-myth is about franchising. Build a business that can work with interchangeable parts. Think things through and document well enough so that the process is replicable and reliable.

Entrepreneurship is about relentless decision making, which can be the mundane – what to have for breakfast – to the trivial – which shade of grey to use on my business card – to the severe – what product should I produce. A good entrepreneur triages the decisions, hopefully spending time on the important decisions and less or no time and energy on the less important ones.

With a franchise mindset, minor decisions get made once, documented, and never have to be addressed again. This mindset works when you have the discipline to not pick up the issue once it is settled. Yes, you *could* go through and change the color scheme for the business cards, but that was decided and we will not revisit it for a long time.

The franchise president and I discussed the difference between the mindset of “conventional” startup people and building a franchise. He had a backend developer who build an extremely convoluted, hard to understand, and impossible to update piece of software. The developer wanted to remain “essential” to the company by ensuring that only he could manage the code. This attitude is commonplace in the world of startups – and is all about the person’s ego/insecurity.

The franchise mentality is more about making me replaceable and replicable so that I can go on to other things, which is the exact opposite of this developer’s mindset. There is an ego/insecurity shift that makes this happen, but the startup ecosystem works against this.

The startup ecosystem has a lot of cult of personalities (see Steve Jobs, Elon Musk) and an explicit emphasis on “building your brand”. This feeds situations where the person becomes “indispensable” – the exact opposite of franchise thinking.

Anyone who sells services for a living comes to the realization that selling time is a terrible business model. Everyone who sells their time wishes that they were selling a product that scales. Time is your most precious asset, and you can only charge so much per hour.

But by thinking like a franchisor, your time can be scaled infinitely. The product is not your time, but the product is your expertise which is captured in a process that can be replicated by other people. Avoid the siren’s call of making yourself “indispensable” to your company and try to make yourself completely replaceable.