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Entrepreneurs’ capital resources represent perhaps the most important ingredient to their business success.  It simply takes adequate capital to start, maintain, and take new enterprises to profitability.  New entrepreneurs too frequently start their ventures with inadequate capital resources.

Franchisors know how much money typically is required to start their units and to take them to profitability.  They therefore discourage under-capitalized candidates and do not award valued territories to them.  That caution saves under-capitalized entrepreneurs from getting into businesses where the odds would be against them from the beginning. 

Compare that qualification process to the independent startup world.  Anyone can start a new independent business by coming up with a name, purchasing a telephone listing and business cards, and announcing “We’re in business.”   Quite frequently, however, they are under-capitalized from day one and end up purchasing “Going Out of Business” signs a few months later.

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