Having spent the past ten years in franchise development and worked with several hundred organizations in launching expansion programs and building both national and international franchise systems, I have seen the process work first hand.
Franchising is a duplication of a successful business system through training and the incorporation of qualified business partners. A franchise system is a distribution model that combines the benefits of a unified brand with a defined system of operation. Companies franchise a business in order to expand into new markets with less cost and greater operating efficiency.
A franchise program can be developed for businesses in virtually any industry. Retail businesses, service operations, restaurants and other industries have utilized franchising successfully. The reasons that businesses franchise and expand through independent distribution channels are the following:
1. Time – in many businesses, there is a short lived opportunity to expand and take advantage of a market. The lifespan of some market opportunities can be short lived and if you cannot expand a business quickly enough to capture market share you will lose out on an opportunity. Franchising allows businesses to expand with speed and efficiency that is unparalleled by most expansion vehicles.
2. Capital – independent distribution channels can allow businesses to expand utilizing an investor’s capital and contribution to the franchise system. If done correctly, a franchise system can grow organically – as partners invest in the system, the franchisor can grow using the incoming capital put into the franchise model. Franchising provides an investment vehicle that allows a franchisor to bring on investors without giving up equity or control in the company.
3. People – it is critical to select only the most qualified and right franchise prospects to join the franchise system. By putting people in business for themselves, there is a significantly higher level of efficient management in operating the local units. Franchising allows a business to expand into farther reaching markets without the cost and headaches involved in opening company units.