Is Franchising the Best Model for You to Expand Your Business?

If you already have a successful and proven business model, then franchising can be a profitable way to grow your business.  Franchising basically means licensing your trademark and business model to a franchisee in exchange for, continued royalty payments, a fixed fee, or a percentage of gross profit. Franchisees are looking for long-term profitability and sustainability, so your business model must have a proven track record of achieving high profit margins and continued stability and growth, even through variations in the economy.

If you want to expand your business fast then franchising may be the best route for you. As a lone company, opportunities for business growth may be limited due to financial restraints.  Since the franchisee is the main investor in the franchise, your costs for expansion are minimised.  Franchising allows you to replicate your winning model in a number of national and international locations – think of McDonalds, Starbucks, etc. Your brand profile is hugely increased but with the least amount of time and outlay from you, the parent company.

Franchising is about creating and maintaining a win-win situation for you and the franchisee.

Benefits to the Franchiser include:

  • Lower capital investment, as the franchisee provides the necessary capital
  • More rapid expansion than a stand-alone operation
  • A dedicated and success-driven franchisee
  • Freedom from day to day management of the franchise
  • Enhanced brand image and visibility in new locations
  • Continual revenue to sustain business growth
  • Benefits to the Franchisee include:

    • Reduced risk by acquiring a proven and tested business model
    • Use of established and successful brand
    • Thorough training in the business systems, methods, etc.
    • Ongoing support from the franchiser and other franchisees
    • Lower costs due to group purchasing power
    • Help with marketing and advertising
    • The franchise will be signifying who you are as a brand; your integrity and reputation, so building a solid working relationship with the franchisee is critical. They will benefit significantly from your experience and training, which in turn will lead to the success of the franchise and increased profits for you.

      Before embarking on franchising though, be thorough in investigating all legalities of the process. Different countries may hold different franchising regulations, therefore be sure to check specific legal requirements and procedures. It may well be wise to consult a professional who is experienced in this area; they may help you to avoid some of the consequences associated with drawing up a Franchise Agreement incorrectly.

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