Franchising can be a great way to grow your business using other people’s resources and capital.
It would be fair to say that most businesses could be franchised. If your business is proven, profitable and portable (can be taught and replicated) then you have ticked the first box. However it is essential that you make sure franchising is right for you and your business. It is a growth strategy, not a get rich quick scheme. Done properly it can provide an excellent platform to grow your business nationally and internationally.
What is franchising?
Franchising is essentially a “partnership model” between a “franchisor” (the business owner) and a “franchisee” – typically an individual who wants to have their own business supported by a larger business with a proven and successful business model, systems and processes.
The Franchisee pays you an initial investment for the licensed rights to operate under your brand. They receive training and on-going support from you to help them launch, develop and grow their business. They would also expect to pay you a management services fee/royalty payment. This would normally be a percentage of their turnover but could also be a fixed monthly payment. In addition to this you may receive a monthly marketing levy which you would use to market and develop your brand nationally. Their business will be a “mini- me” version of yours and will typically operate within a defined and usually exclusive territory. The partnership is governed by a Franchise Agreement which protects your brand and provides all parties with clarity as to what is expected of them along with the rules for operating and selling the business.
There are a number of benefits to franchising your business. Although not exhaustive the following will give you some idea as to the benefits available;
Growth quicker & cheaper than “organic growth” – when you franchise your business you grow using the capital and resources of your franchisees. This enables you to grow without the capital burden required to take on multiple properties or employ staff.
Motivated people – There is nothing more motivating than knowing if you don’t make a success of your business you won’t earn any money. As Owner Managers your franchisees are more likely to go that extra mile, open that little bit longer and try that little bit harder that employed staff.
Brand Development & Consistency – A network of franchisees will help develop brand recognition throughout the UK or even internationally. Having a robust business model underpinned by detailed documented systems (known as your blueprint) supported by a professionally drawn up Franchise Agreement will ensure your franchisees deliver brand consistency throughout your network.
Less Hassle – You are responsible for supporting and mentoring your franchisees. However they are responsible for their staff and the day to day business operations. This means that all the challenges that come with having staff are down to the franchisees to deal with and not you.
Increased Buying Power – As your business grows so does your need for materials/ supplies. This can give you greater buying power, drive down the cost of production and/or increase your profit margin.
The benefits of franchising are clear however. However franchising is not for everyone and not all businesses can be franchised successfully. It is a business journey that cannot be rushed. To execute this form of growth strategy takes time.
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