Your business is profitable… now what?

Expand Arrows Concept

The Benefits Of Franchising Your Business


If there’s one rule in business, it’s that nothing is guaranteed. Expansion will no doubt be on the mind, but however successful you’ve been in business thus far, it’s not a given that new branches in other cities will be profitable. By adopting the right models, you can minimize the risks and costs of expansion while maximizing potential revenues. Franchising is one of the most effective ways to grow your business. As a franchiser, you will be able to:


Leverage Local Knowledge


Every community is different, and there’s no promise that a business model that worked in one town will succeed in another. Traditional business expansion requires owners to carefully research the communities they plan to expand into, figuring out how to best comply with local laws and customs. Carrying out such research is expensive and time consuming, and by the time you’re finished, another business may have filled the niche in that community that you had hoped to fill. By opening a franchise, you rely on the knowledge of local investors and entrepreneurs. Your franchisees will have experience marketing in the community and complying with its laws, and can thus begin doing business more quickly.


Reduce Risk and Raise Revenues


Even if you have a detailed understanding of the community you’re expanding into, opening up a new branch is expensive. You have to construct a new building or rent an existing one (unless you run a mobile business), pay for all of the inventory, and pay your employees long before you start to bring in new revenues. If your new branch is not as profitable as you had planned, the entire operation can quickly become a money sink. Franchising allows you to externalize all of these costs onto the franchisee. If the new store doesn’t succeed, your losses will be minimal, but if it does, you will receive a portion of the revenues. Thus as investments in your business go, franchising is one of the least risky ways to make a profit.


Find Fast Finances


Beyond minimizing the risks of financing a new branch, franchising also speeds up the financing process. To open a new branch on your own, you would either have to save up your profits or ask for financing from investors or banks. Both decisions are time consuming and put financial strain on you and your business. Because franchising relies on the franchisee’s capital, however, you can franchise your business as soon as you find a prospective franchisee with the means and willingness to get involved. For this reason, franchising is one of the fastest ways to grow your business, allowing you to take advantage of new opportunities as soon as they arise.


Tap Into Talent


More than any other form of expansion, franchising gives each branch manager an incentive to go above and beyond in expanding and improving your business. Because franchisees own their local branches and keep most of those branches’ profits, the better their branches do, the more money they will make. They will thus actively look for new customers or ways to cut costs, doing everything in their power to make the business more successful. By contrast, salaried managers have little stake in the long-term success of your business; as long as they follow your instructions well enough to avoid being fired, they will continue to receive their salaries. Franchising is thus the best way to convince managers not to rely on your instructions alone, pursuing new business opportunities whenever they arise.


Franchising also makes it easier to find talented managers in the first place. Offering a chance to invest in and own a branch will attract the most intelligent, ambitious, and hardworking people in the community. Such individuals are much more likely to make a positive contribution to your business than those who are merely looking for a salaried managing job.



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