Is Franchising Your Business a Good Idea?


While there are always risks in growing your business, franchising it out is often one of the safer forms of operational expansion. Generally speaking, it allows you to share your successful business model with other people – in return, you get a fee and a cut of their profits (royalties).

In this article, we’ll cover a couple of reasons why replicating your business model with external partners might be beneficial to the future of your organization, and whether or not your business is franchise ready.

BENEFITS OF FRANCHISING YOUR BUSINESS

Minimize the Risk from Growth

Growing your business can be risky. If you own a retail business then one of the most logical methods of growth is by purchasing premises. While this sounds like a simple process, there is no guarantee that your additional store will generate profit, or even enough revenue to remain operational. By franchising, you put less money into a location than you would do outright; the franchisee provides the bulk of the investment. This, as you have probably already worked out, minimizes risk. If your business idea is solid then the royalties you can earn from multiple locations will more than make up for the revenue generated by a single store.

Access to Genuine Talent

While we’re not saying that nobody in the retail sector is talented, store work is often seen as a blue-collar job that requires little skill. With this in mind, you will struggle to find potential business leaders by simply offering them a management position. Franchising, on the other hand, offers intelligent and ambitious people the opportunity to run their own business. By doing so, there is a good chance they will work harder and longer to earn profits, rather than taking a regular salary.

Simple Capital Expansion

Finally, franchising is a great way to generate working capital. As your franchisees put money up-front to purchase one of your outlets, you grow the number of locations your business has without using up any of your own capital, or by using loans from banks or investors.

IS MY BUSINESS READY TO FRANCHISE?

Before you go ahead and start selling your business model to potential partners, there are a number of things you need to consider. Your first thought will be how to franchise my business. This is a good starting point as we don’t advise you to dive into franchising straight away.

First of all, you need to ask whether your business is ready. Is it unique? Is there enough of the market left? We advise you take a look at your competitors and see whether they’ve had any success in franchising.

Then you need to consider if your business is simple enough for a novice business owner. If it’s not an easy concept, then many potential franchisees may be put off. While they’re using your business idea, and you need to ensure they’re capable, potential partners are also investing a lot of money. If they can’t do it – they won’t.

Finally, it’s all about profit. Does your business have the potential to work in various cities and towns across the country? If your brand is unique, or niche to a specific place, then you’ll struggle to expand in other areas. It’ll be hard to convince people otherwise.

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