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For anybody looking to expand their business, building a franchise network vs expanding their own branches organically are two contrasting ways available.
Some franchisees may be familiar with the benefits they get - 'be in business for yourself, but not by yourself, but what are they to you as a company with an expanding business? Well, this article will be looking into just that - the benefits that come along with franchising your business - with the hope of helping you and your business on your next venture.
In a word, the major benefits of growing your business through franchising are money, time, and people.
This is probably the best reason to franchise your business. For entering new markets, businesses would have to come up with the cash themselves. With a franchised business, most of the costs will be incurred by the franchisees: real estate, equipment, fixtures, furnishings, inventory, working capital, etc. Each franchisee finances its own outlet. While the franchise would meet all the expenses and collect the revenue, you'll get a franchise fee and royalty fee or a mark-up on items sold by them.
Operating more than a single location independently will not only drain your business resources but mental and physical strength as well. Franchise systems allow for everyday operations at different locations to be managed by the franchisees instead of the franchisor. Thus, the franchisor is able to focus on optimizing the business, supporting franchisees, and planning for the future. When your franchisees are provided with thorough training and gain a good understanding of its objectives, you can earn high royalties.
Franchisees make great managers. A few years back, a chain of doughnut stores transitioned from being a company-owned chain to a franchised chain where the managers stayed on as franchisees. The result of the shift was apparent the very next day. The shops were clean, the sales were high, and the donuts were big and better. The difference was that instead of managers, the shops were taken over by proud owners. They carry the operational risk as they are personally invested in the business and have to ensure its success. In franchise models, picking self-motivated and self-disciplined franchisees is a key ingredient for being successful. They'll not only enjoy the perks of their own hard work but will also contribute to the overall growth of the company.
You will get a competitive advantage when you tap into the local expertise of the franchisees. They've always known the local market, the people, the places and mostly have networks already in place. Moreover, they can also contribute fresh ideas, maybe outline opportunities that you might not have identified earlier.
The franchise is a win-win situation for both the franchisor and franchisees. Companies can expand without much investment and manpower while the franchisor can quickly set up a business and see higher revenues. Thus the franchisor-franchisee bond is simply powerful.
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