If you want to expand your business, one popular option is franchising. You would be the franchisor, allowing your franchisees to open their own locations that match your brand. They would pay you a small portion of their profits in royalty fees every month.
Going the franchise route has several excellent benefits.
Making It Easier to Expand
There are a few common obstacles when you’re trying to expand your company and open in more locations. For most, the main problem is the financial requirement. When you open in a new location, you need to sign a lease and pay the monthly rent, as well as set up contracts with any necessary service providers and suppliers. You could easily end up spending thousands of dollars or more.
That’s not an issue with franchising, because the franchisee will cover those startup costs. This allows you to grow your company and reach new areas without exposing yourself to nearly as much risk.
When you’re handling expansion yourself, it’s a time-consuming process. You need to choose a location, design it, hire employees and get everything else setup so the new location is operational. If you handle this on your own, your time will limit the amount of locations you can open. With franchising, the only time commitment involved is meeting potential franchisees, signing the contract with them and providing occasional support when it’s needed.
An Owner Can’t Leave at a Moment’s Notice
A major concern if you open a new location is finding the right person to manage it, since you won’t be able to handle all your company’s locations on your own. That’s not necessarily a drawback of owning all your company’s locations – you would need to do your homework on a person whether hiring him as a manager or bringing him on as a franchisee. The difference is that it’s much easier for a manager to leave than it is for a franchisee.
A manager will want your company to be successful, but he’s receiving his salary regardless of how the company is doing. If he gets a better offer from another company or decides for any other reason that he doesn’t want the job anymore, he can quit and leave you scrambling to find a replacement.
A franchisee is a business owner, too, which means he’s far more invested in its success than any employee could be. He needs his location to make a profit if he wants to earn any money from it. Since he owns that location, he can’t just up and leave at any time.
Franchisees Know the Local Market
A franchisee will typically open his location in the area he lives or one he knows well. This means he is already a part of the community, so he has connections and knows how to reach them. Your company’s new location will have a better chance of success when it’s run by someone who as knowledge of the area instead of an outsider.
Less Work for You
Franchising takes quite a bit of the pressure off your back when it comes to day-to-day operations. You don’t need to manage anything or check in with franchisees every day. You provide guidelines and a general plan for them to follow, but other than that, you just check in with them from time to time or talk to them when they ask for assistance. Franchising leaves you with a much smaller time commitment compared to opening a new location on your own.
Only you can know if franchising is the right move for your company. It certainly has its advantages, so if you have a brand that would work well as a franchise, you should consider giving it a shot.