Top 5 Reasons for Franchising

Franchising Deal

Franchising is a business world trend that provides both franchisors and franchisees with numerous benefits that would otherwise be unavailable. While a lot of people tend to look at these things from their own perspective, it's important to see both sides. Who knows, you might just start off as a franchise, grow enough in volume that you buy your company out and become independent. Years later, you might start franchising on your own. All in all, here are the five most compelling franchising arguments that you need to be aware of.

Accessing Capital

1. Easier access to capital

While starting your own brand may be considered as something more satisfying, the fact is that starting a franchise provides you with an easier access to capital. In most cases, this implies that you, as an entrepreneur, can grow a business by using someone else's resources.

Some see this as restricting, however, in most cases, the franchisee is allowed to expand as much as they can, as long as they sign the lease. In this way, the franchisor gets the benefit of expanding business and growing brand name, while the franchisee gets the experience of an independent business.

Efficient Management

2. More efficient management

The problem with capable management lies in the fact that a lot of people feel like there's no room for them to expand, once they reach the position of a regional manager. Even those who aim to become a part of senior management are more likely to invest the effort into the grand picture, rather than focusing on the local branch. In other words, they might sacrifice their own team and their own branch (by mercilessly overworking it) in order to achieve short-term results, thus impressing their supervisors. As for the long-term problem that this will cause, they see it as the problem of their successor.

With franchising, you get to replace the manager with the franchise owner. This means that the person in charge of your franchise is someone with a direct interest in its success. All of their goals are oriented towards the success of the franchise in question and promotion and relocation are not even an option in their books. Needless to say, this works to everyone's benefit, seeing as how a franchisor can rest assured that they have an adequate representation at their target location.

Boost Trust

3. Instant boost to trust

One massive problem with starting out on your own lies in the fact that you'll be completely obscure to your own audience. In 2018, they'll most probably look you up online and, once they fail to find anything about your brand, they'll probably dismiss the idea of working with you altogether. On the other hand, a mention about your company, even if it's a different branch we're talking about can change all of this. This is particularly true in trust-based fields like the automotive industry. This is why it's much smarter for an ambitious entrepreneur to look for a mechanic business for sale, rather than looking for a business of their own.

4. Simpler supervision

In theory, branches are supposed to operate completely independently from the mother chapter. However, in practice, this seldom ever happens. Even in the most autonomous and loosest of operations, you would still have to put someone in charge of supervising the branch in question. Sure, by franchising it, you would still have to keep an eye out for it, in order to notice any activities that are against the contract or a behaviour that could harm your brand in the long-run. Nonetheless, some bad business practices like spending money on irrelevant purchases or hiring relatives don't affect your brand in any way, whatsoever.

5. Penetration of secondary markets

The market penetration is an arduous work, especially if it's a market you know virtually nothing about. For you, a certain market might be considered as too risky or not profitable enough. However, if you see someone with the right business plan and an idea to try their luck in this field, it would be outright counterproductive of you to try and stop them. Another opportunity here lies in the idea of independent goals and agendas of the franchisees. You see, some markets are on your priority list, even though they're not too high. A franchisee might have a different set of priorities than a franchisor which might even spread some of your influence to the tertiary markets, as well.

To sum it up, from all of this ordeal, franchisors are bound to get some free promotion, expansion and a more dedicated local management, while franchisees tend to receive capital, brand endorsement and a reputation boost. Sure, there are some downsides to franchising, however, gains usually tend to outweigh them by quite the margin.

Guest Author

Diana Smith

Diana Smith is a full time mom of two beautiful girls interested in topics related to marketing and the latest business technologies. In her free time she enjoys exercising and preparing healthy meals for her family.