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Franchising Your Business

Written on May 9th, 2007 by Joseph in Franchising Developments.

Are you certain that you business is the next McDonald�s? Are you confident that your concept is teachable and there is a need for the product/service you offer? Do you want to expand but lack the necessary capital? Well, perhaps you should consider franchising.

Why Franchise?

Usually, companies franchise for one of 3 reasons:

* time
* people
* or money

However, the main barrier to expansion faced by today�s businessman is capital. Franchising allows companies to expand without the risk of debt or the cost of equity. The benefits are numerous. And since the franchisee has to provide the initial investment when purchasing a franchise unit, franchising allows for expansion with minimal capital. Moreover, since it is the franchisee who signs leases and commits to various service contracts, franchising also allows for expansion with virtually no contingent liability, thus greatly reducing your risk as the franchisor.

Another barrier to expansion that many businessmen face is finding and maintaining efficient unit managers. Often, business owners spend many months finding and training a new manager only to see managers leave or hired away by a competitor.

Yet, franchising allows you to overcome many of these problems by substituting a motivated franchisee for the unit manager. Because the franchisee has both invested in the franchise and has a stake in the profits, they are more likely to have the passion and commitment required for the franchise and unit performance will often improve. Since a franchisor’s income is based on the franchisees gross sales monitoring unit level expenses becomes significantly less burdensome.

When wanting to open an additional business unit, it takes a lot of time. you have to search for a site, negotiate leases, arrange for design and build-out, secure financing, recruit and train staff, purchase equipment and inventory and more. The result? The number of units you can open in any given period of time is very limited.

In this case, franchising is often the fastest way to grow. This is because it is the franchisee that performs most of these tasks. Of course, as a franchisor, you have to provide the necessary guidance but the franchisee does the legwork. Therefore, franchising not only allows the you financial leverage, but it allows you to leverage your resources as well.

Is your business “Franchisable”?

Franchising is a somewhat flexible format, and just about any type of business can be franchised, provided it meets some basic characteristics:

* It needs to be credible
* Needs to have a proven track record
* Requires experienced management
* A proven concept
* Achieved good local press or public acclaim
* Needs to be unique and adequately differentiated from competitors
* Must be marketable as a business opportunity
* Needs to boast a sustainable competitive advantage
* Needs to be teachable
* Operating procedures should be documented
* Needs to provide an adequate return.

If your business meets these criteria, then it may be a good candidate for franchising.

If properly structured, franchising can allow small companies to more effectively compete with much larger competitors. It can also allow large companies to gain the advantages of highly motivated unit management while reducing overhead. Per se, franchising is an option that more and more companies should explore.

Remember, the key to success in franchising is successful franchisees. Without these successful franchisees, no franchise system will last. So, if you can put the interests of your franchisees first, those franchisees might just help you become the next McDonald�s!

2 Responses to “Franchising Your Business”

Qualities of a True Franchise » The brandEXPANSION Hot Press » Qualities of a True Franchise Left at 7:07 pm on July 27th, 2007
1

[…] by Will Kiesling You’ve landed on a successful business in one location. Do you have what it takes to be the next great franchise opportunity? […]

Qualities of a True Franchise - Franchise Opportunity, Businesses for Sale, Business Franchises - First Prize Franchise Left at 2:01 am on July 29th, 2007
2

[…] by Will Kiesling You’ve landed on a successful business in one location. Do you have what it takes to be the next great franchise opportunity? […]