If you’re looking to expand your business and you have a great idea, a franchise may be an option. Many businesses around the world have increased their market share by adopting a franchise model for growth. Franchisees can be extremely cost-effective and an excellent alternative to growing a business yourself.
The marketing concept of a franchise is built around incentivising other franchisor licensees. You provide the know-how, intellectual property and the business model, as well as a brand and the rights to sell the service or product. The franchisee takes on board the information and delivers within the marketplace.
Is your business able to be franchised?
Only certain types of businesses are suitable for the franchise model. You need a high-quality product that is already in demand and a system of operation that can be taught to franchisees.
Most franchises are based on different locations, as well, so that franchisees have their own area in which they can operate. There are well over 70 industries that have franchising formats, including electronics, food and hospitality, financial services, travel, and automotive market. You need to work out whether you have the essential elements for franchise and – if you do – then need to decide whether it is the right option for your business.
There are some important reasons that franchising may work for your business
Growing your business
Franchising is a very cost-effective way to grow a business. You won’t have to cover the costs of different locations and staff, and you may well have franchisees paying you some more for every license that they sell. You can quickly develop a salable business through the expansion efforts of your franchisees, and you can continually incentivise them by improving what you deliver.
Fast business expansion
Franchising is based on the multiplication of a system rather than creating something new. When you have something that works, other independent business owners can take it and drop it in their marketplace and provide their own effort to get it off the ground where they are. After all, franchise-owned models outperform other types of models because you have incentivised people throughout your business.
Leveraging on a franchise model, you decrease the amount of supervision that is required with different hubs and can make things more profitable. You don’t have to worry about local marketing, firing staff, training staff, payroll, accounting and the site of operation in anything other than your own area, meaning your business is lean, and you can potentially make greater profits.
Because franchisees are owner-managers, they tend to take great pride in their own operation. This can increase the quality of the operation compared to using managers. Franchisees will look for opportunities to grow and will ensure that they offer an industry-leading product, quality customer service, follow the proper business model of operations, production, and insuring against business risks. All of these will ensure you have peace of mind knowing that your brand is being represented well wherever it is in operation.
Franchising also enables you to grow your business using other people’s money in order to deliver better services to your franchisees. You can go national or international in relatively little time by just finding the right people to own a franchise. You will receive in most cases a franchise fee, ongoing royalties and a percentage of sales generated from each location. Franchisees will be happy as long as they are profitable and gaining value to what you are bringing to the table.
Increasing brand awareness
Brand awareness generated from the franchise model tends to be excellent, with franchisees going out and promoting the business far and wide. This links back to the potential to grow your business very fast with a franchise model.
Only you can work out whether your business is good for the franchise model of operation. We always recommend that you grab a piece of paper and work out an exhaustive list and then make your decision from that. Make sure you also take advice from franchise advisors and consultants in a target marketplace you may have seen a similar model operate.