What comes to mind when you hear the term “franchise”?
You naturally think of fast-food restaurants such as McDonald’s, KFC and Subway. But what if I told you that franchising can be one of the (if not the) fastest and most leverageable ways to grow YOUR business?
Yes – even if you’re not in burgers and fried chicken!
Business franchising comes in various formats and types, and can be applied to ANY organisation. However, as a Business Coach, I have seen so many entrepreneurs and business leaders quickly dismiss the idea of franchising before they even explore this option.
So, in this blog, I’ll discuss some of the key benefits of branching out your business through franchising and how it may be the ideal option for you.
What is franchising?
Franchising is a legal and commercial relationship between the original company owner (the Franchisor) and an individual (the Franchisee) who wants to establish an additional branch of that brand by using its trademarked branding and business model.
Basically, it’s a method that allows a new business to operate under the established brand of another and to sell its products and/or services for a specified time period.
According to the latest statistics, there are around 90,309 franchised businesses operating in the country, employing a total of 514,761 people.
The reason why I endorse franchising as such a smart approach to business growth is because of one critical and advantageous factor: leverage.
Understanding this advantage (and more) of franchising will help you decide if it’s a suitable option for your own business expansion plan.
I’ll explain more below.
The business benefits of franchising for the Franchisor
From my experience, franchising your current business offers so many advantages and can be an ideal expansion model for you.
Here are the three relevant benefits of deciding to expand your business by offering a franchise model as a Franchisor:
- Faster business growth
Developing and building your own business over time involves a lot of effort, hours, strategy and patience.
I’ve seen business owners take years or more to reach an ongoing level of strong, measurable success. However, with franchising, you can fast-track this growth because the possibility of you achieving a return on investment (ROI) can take around 6 months.
That’s because franchising not only allows you, as the Franchisor, to gain financial leverage through the Franchisee’s own investment, but also leverage human resources as well, as they hire their own team.
In other words, because you’re not taking the burden of building your empire on your own, you can give another driven business owner access to your tried and tested model, while expanding your brand’s reach and earning a fee, all on their investment, exponentially speeding up your growth trajectory.
- Minimised risk of failure
Starting a business independently – no matter how big or small – is risky. That being said, these failure risks can be significantly lower when you are sharing the burden with your franchisee.
Also, since it’s the Franchisee, and not you as the Franchisor, who signs the lease and commits to various contracts, franchising allows for rapid business expansion with virtually no contingent liability, greatly reducing the risk of failure.
- An optimised balance sheet
Since Franchisees use their own capital, you as the Franchisor have virtually no investment at the unit level. Also, depending on the offer, the Franchisee may have to pay you an upfront sum too, just to get started!
That’s a huge positive for your financials while accessing growth at the same time.
Franchising essentially allows your business to grow using the resources of others. By leveraging other people’s money and time, not only do you need far less capital to expand, but your risk is largely limited only to the capital you invest in developing your franchise company (which often is not very much) – allowing you to significantly increase your profitability.
Now, what do you think of franchising as a business growth option?
While there’s no “one-size, fits-all” approach when it comes to franchising, understanding the benefits of this option as a way to expand can open your mind to making your model franchise-ready for the future.
With so many advantages and so few disadvantages, you may wish to consider franchising as a viable option in the next stages of your business.
Do you need help with franchising your business?
Smart business owners are those who are constantly finding leverageable ways to further expand their business towards success.
However, it can be difficult to navigate through the complexity of branching out your brand and building your own business model that is franchise-ready.
So, whether you need help exploring other options or to help you realise the full potential of expanding your business through franchising, I’m here to help.
As a Business Coach and Mentor, I work with business owners like you so you can sell, buy and build franchises which can all lead to achieving your overarching business goals.
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