Franchising is a big thing especially when big brand names allow smaller players to use their business name for royalties. This is so especially in the sectors of manufacturing, transport, hospitality and mainstream retail industries. Why would a small business or company want to get into the boots of a big league player like an international franchising firm, instead of opening another startup or pumping that money into its existing business? A number of reasons lead businesses to franchise. Below, are some of the reasons for franchising.
1. Poor management
Many entrepreneurs have difficulties finding and retaining good managers. A business owner might find the perfect manager, train them well and just when things are going okay and the business starts to stabilize, a competitor with better terms hires your manager only for the business owner to start again from scratch. This is very costly, time wasting, and takes a huge toll on the business.
With a franchise however, the new owner becomes the manager and no has better or more drive to see a business flourish than someone who has invested heavily in it. The level of performance improves and what more, there is better compensation in terms of profits from the new owner.
2. Lack of enough capital
Many small businesses face expansion barriers due to lack of capital. Accessing the kind of capital they would want to grow further is a difficult task, as they might not have the capabilities to borrow that kind of money from a financier.
Franchising on the other hand offers a better alternative to this problem. Most business people turn to franchising because there of the ability of business expansion without risking any debts or costs. The franchisee provides every capital needed when opening and operating the franchised unit. The franchisor uses other people’s money to grow the business and unfettered by debts, this leads to better growth.
3. Speedy growth
Many entrepreneurs that go a step further in expanding their business and create something innovative are at great risks of their idea or concept benefitting someone else better than its benefits the entrepreneur. The only way to save face is by franchising.
Franchising exposes them to a better position of capturing the market leadership of their innovation before the competitors get to them. The franchisor performs all the tasks of finding market for the innovations. Franchising companies in most cases saturate the market way before other competitors come in.
4. Better profits
Due to so many changes made by the franchise organizations, higher profits and better marketing skills put in place see profits rise. The franchisee undertakes things like payroll, lease negotiations, site locations, training, hiring and many others creating a leaner organization with ease of supervision. This in turn leads to better management and more profits.
5. Better valuations
Due to the combination of many positive attributes like more profits, faster growth, and better advantage in organization, franchisors get valued more than other businesses. This comes in very handy especially when you want to sell your business. You get more value for the business than what it could have fetched initially.
6. Risk reduction
In every franchise, the franchisee takes every responsibility in investing, purchases, hiring, working capital, inventories paying for any build-outs, executing equipment leases and takes every liability for anything that happens within the business. This leaves you with no liability especially of the employee’s litigations. This also allows you limited exposure.
The above factors and many more make franchising a good way to go. It is one way to effectively amplify your business growth and get maximum returns from the business. Look for proven franchising systems that will easily achieve your goals and you will not regret making that decision.