Franchising offers worthwhile benefits for both the franchisor and the franchisee. For franchisees, they get to build on an established system which reduces the overhead for coming up with planning and management strategies from scratch.
The benefits for franchisors are especially significant because franchising their business gets them to save money on opening new outlets ( because franchisee pays them to open the outlet), it reduces management overhead for them and helps their business see a faster growth in record time.
Below are the 6 most important benefits of franchising for small as well as established businesses
1. No Pressure in Terms of Capital
One of the primary reasons why most business don’t franchise is because of lack of capital. Opening a new outlet would require investment and most small businesses just can’t do anything about it.
Franchising helps lift off pressure of expansion as they franchisees are the ones who pay you to open the outlet. Businesses won’t have to worry about acquiring debt or getting more capital. The franchise fee in franchising will be given by the franchisees who buy an outlet for your business. This allows companies to grow using the rescuers of franchisees and if the system has given proven results, both parties would see great returns from this endeavor.
2. Better Management
Good management can take your business to a whole new level of success in not much time. But it is hard to find such management. And if you are planning on expanding, you need managers who are motivated to add value to your business.
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Franchising seems to be the proven effective way of hiring motivated managers who are passionate about your business. Because with franchising, the owners are the managers, and nothing motivates an individual more than the fact that their success or failure is directly going to affect them.
3. Faster Business Growth
There is no limit to the growth of a franchise network. It can go as far as your developed infrastructure is capable of supporting. If your business has complete system for recruiting and training franchisees, there is no limit to how much your business can expand.
But it requires constant support and monitoring from the franchisor’s side. Fast business growth will give you better returns but it will also increase the responsibility at the end of the franchisor.
4. Fewer Employees Needed
Since the franchisees would handle all the operations of the franchise independently, the franchisors would need much fewer employees to manage their operations. Instead, if you go for developing different company-owned units.
You’d need staff for each one of them and you’d need to monitor them as well to maintain the quality of your services. You can imagine the kind of capital it would require handling business operations in this way. With franchising, you’d be saving a lot of money while seeing almost the same level of growth.
5. Increased Business Profit
With franchising, your business gets to leverage on the investment of the franchisees and there are no staffing and supervision costs that you have to bear, which increases your net profit to huge extent. Plus, there is no hassle for directly doing local marketing and conducting human resources operations on the business owners.
This will also help businesses acquire a greater market share and more brand equity in a much shorter amount of time. The overall profitability will increase a lot for a business with franchising.
6. Limited Liability
The franchisors would bear the least amount of risk and liability in terms of capital, lease agreements and Employees Agreements as well. The franchisees would take care of the leases for requirement and would bear all the liability for what happens in the unit. You save a lot of financial resources with franchising in terms of inventory, hiring employees and stuff like that, which greatly reduces the risk for you.
Although franchising involves certain risks as well, the overall benefits outweigh the costs. If the franchising is done after properly planning and in a strategic way, it can take the success of your business to a whole new level. Make sure to consult a Franchise consultant for more details about the entire process.