Franchising has been around for many years, and has proven to be an excellent way for businesses to expand. It allows individuals to own and operate their own business under a business model that has been tried and tested, and ideas can be bounced between franchisor and franchisee to gain greater success.
Deciding to become a franchisor can be both exciting and nerve-wracking, so it’s a good idea to understand and consider exactly what the advantages are before taking that leap of faith.
Faster growth and capital gain
Opening new outlets yourself requires a large amount of setup costs, but franchising passes on most of the financial responsibility to your franchisee. And as a result, it is in the best interests of your franchisee to succeed. Once each new franchise outlet is up and running, you as the franchisor will see the capital gain and be able to use the extra money to expand further.
New and improved systems
Even though you would have already put in place systems, procedures, and policies for your business, having a fresh set of eyes can be to your benefit. The franchisees that you choose to work with will most likely bring with them experience from working in other businesses and will be open to sharing innovative ideas to improve systems as well as your products and strategies.
Since franchisees put their time and effort into opening an outlet, they are going to be more committed to getting good results from their business, which in turn means more profits for you. Also, once your brand is established and known to be reputable, more people will be attracted to job vacancies within the franchise.
After establishing a brand that is well-known, significant value will be added to your business. This can lead to having better leverage with suppliers, as well as making the sale of the business easier when the time comes.
More time to focus on the big picture
Setting up and running new outlets can be extremely time consuming with organising building consents, contractors, and the employment and training of staff and then looking after customers. Since a franchisee will take on much of this responsibility, a franchisor is left out of the day-to-day work. This means more free time to focus on the bigger picture and concentrate on expanding the company even further, or perfect products and systems already in place.
Being a franchisor also works well for someone who perhaps doesn’t have so much inside knowledge and would prefer to be ‘hands off’. A good example of this is the new owner of Speedy Lube, a car servicing business in regional Australia – while he did have a love of cars, he had no mechanical experience but was able to own the business without getting involved in the day-to-day running.
This is the first post in a series of looking at the advantages and disadvantages of franchising from both the franchisor and franchisee perspective. Watch out for the next post where we will look at the advantages of being a franchisee.