What is Franchising?
Franchising is a growth opportunity for business owners which is availed by selling the rights to open another branch or unit of their business, following the same business model and structure, to anther party. In a franchise arrangement, the buyer pays the business-owner a percentage of the sales after opening a replica of the franchise business under the direction of the franchisor. This benefits the franchisee by operating a well-established brand name with a fixed business structure while the franchisor benefits from the sales and expansion of his brand.
Why should you franchise your business?
Franchising opens new doors of opportunities for a business mainly if you think its time for expanding but do not have the resources to implement growth strategies. There are many benefits associated with franchising your business, following are a few reasons why you should franchise your business:
- Expansion without capital- In today’s economic times, a business owner may find it challenging to organize capital to be able to support the growth of their business. Franchising allows you to broaden your horizons without the risk of a debt or at the cost of equity as the initial investment is provided by the franchisee.
- Time-saving advancement- If you decide to open up another location to your business, the time involved in hunting for an appropriate place and to set it up from scratch limits your progress. Franchising is a complete time-saver if you wish to propel as the growth tasks are handled by the franchisee.
- Less burden on your back- Appointing a trust-worthy unit manager to handle your operations at your new desired location is a tedious task. With a franchise arrangement, you do not have to worry about that, as it is the franchisee’s responsibility to handle all operations successfully since his investment is at stake.
- Better market reach- Franchising enables your business to penetrate markets over a wide area without having to worry about other issues such as, money, managers, operational demands etc.
- More likely to succeed- Since a business pattern is already established and an operational process is being followed, the franchise will be able to generate profits almost instantly when put into action benefitting you with the profit margin.
- Ownership advantage- At the end of the day, it is your brand which is doing well even if the franchisee unit turns out be a more profitable one. Having a stake in the outcome of the operation, being rewarded with marginal income and simultaneously strengthening your brand image are all perks of being a franchisor.
How to determine if your business can be franchised?
Franchising is a relatively flexible option for you to opt for if your business is thriving and looking forward to attain new heights. If your business fulfills the following criteria, you are good to go!
- Has a well established reputation
- Follows a fixed pattern of functions that can be taught
- Reflects a unique business opportunity for others
- Generates good returns
- Can survive in other locations/areas