Have you ever wondered what franchising is and if it is something that you should look into? Franchising is when the franchisor (owner of the brand) grants access and rights to the franchisee (person who wants to set up a unit) to use their trademark name to sell their products and/or services. A lot of massive brands all over the world have made this an option and become successful from it. There are a number of benefits to doing this …
CAPITAL
It is difficult for a lot of businesses to get their hands on capital, therefore franchising is a good alternative for this because business owners who put their company up for franchising can grow without risking more debt or the cost of equity. The franchisee’s opening separate stores will be putting in the money required to open and run the unit. It’s a win win situation for both parties, where people get to run a business under an already successful name for the franchisee and the franchisor does not have to pay. Any legal documents or contracts that need to be put in place for the franchisee’s unit do not require the franchisor to sign, so liability for them is limited.
MANAGEMENT IS MOTIVATED
Training and hiring new managers is not only time consuming but can be expensive if you train them up and then they end up leaving after a few months. Whereas franchisees have more of a commitment to the company as they have invested into it and therefore they are motivated to make sure the business is as good as it can be. They will be the owner of their store rather than being there as temporary staff. You will end up getting a higher quality in management, with overall improved operations.
GROWTH
Opening a single store can take years of planning and before you know it your competition have beat you to it and have grown significantly. Franchising allows for several units to be opened at the same time without the franchisor having to manage everyone. This means that you can hit the market and be widespread before your competition starts to see what is going on. The more stores you open, the more consumers begin to grow trust in your brand and become loyal to you.
STAFF
Franchisors can reduce their employee structures as it will be up to the franchisee to take on a lot of the responsibilities of the business and they will look to employ their own staff in their particular units. It is up to the person who owns their unit to sort out any staffing issues such as if someone were to call in sick and they need to find cover.
PROFIT INCREASE
Franchisors do not have to worry about paying for accounting, payroll, local marketing and site selection costs for their units because that is the responsibility of the franchisee. It can allow the overall company to become highly profitable because they are erasing a lot of overheads that they otherwise would be paying with a new store opening.
IMPROVED VALUATIONS
Franchisors are usually valued higher than other businesses because the nature of their companies means that they grow faster, have increase leverage and profitability. When it comes to a franchisor later selling their business, having that growth structure is definitely a benefit and leads to a quicker and easier sell.
RISK IS REDUCED
After all the points we have talked about so far, it is clear to see that franchising means that you reduce risks within your business. It is the responsibility of the franchisee to take on a lot of the costs when it comes to setting up new units and this does not come down to you. Therefore, if you want to grow fast this is a great option to look into for your company without the worry that comes with managing another store.
Although you may feel as though you are losing control of your business by allowing other people to run parts of it, it is a good way to expand without the stress and putting your own money into it. To be successful in franchising you need to have franchises that succeed, otherwise the franchise system that you have opted for, for your business will not last.
Thinking “I want to find out how to franchise my business?” – if so, contact franchise consultants UK today.
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