Franchising can be a wonderful way to expand your business, but before deciding if your business can be franchised you will want to explore some of the advantages and disadvantages of doing so. In studying the benefits that franchising might have for any business owner wishing to expand through franchise, it’s common to cross threads and find that the advantages for the franchisor are also considered advantages for the franchisee. So although the following list specifically shows advantage to one or the other, most have major benefit for both the business owner exploring the franchising of his business entity or the franchisee:
o Minimal Expense.There is a greater opportunity for accelerated growth with minimal capital expenditure.
o More Freedom. Direct management affairs become the franchisee’s responsibilities, there by allowing the franchisor opportunities to focus on other things.
o Lower Cost/Higher Profits. The franchisee usually has shows great pride in ownership and is self-motivated because of his vested interest and stake in forthcoming profits. This very self-motivation usually results in lower costs for the franchisee and better consumer markets for the franchisor.
o Rapid Growth. Through leveraging the time and efforts of its franchisees, the business can expand much more rapidly without the addition of direct-supervision employees.
o Group Advertising. National and local advertising fund dollars are available for franchisees in much larger amounts than could be normally generated by the franchisor or franchisee individually.
o Group Buying. The pooled resources between franchisor and franchisee mean additional purchasing power, resulting in decreased possible purchase pricing to the franchisee than would be available for a company-owned entity.
o Ongoing Research. Research and development facilities are available to the franchisor in an ongoing basis through communications from franchisees.
o Steady Cash Flow. The franchisor can benefit from a steady cash flow from franchise royalties.
o Control. The franchisor enjoys greater jurisdiction over franchisees through smart and fair contract arrangements.
o Less Liability. Some limits of liability extend to the final consumer. (Franchisees usually are not held to be agents of the franchisor in the event of injury caused by negligence of the franchisee, as opposed to sure liability to the company for injuries sustained in a company-owned store branch.)
o Expansion into Foreign Markets. Expansion into foreign markets becomes an easier, quicker, and less dangerous endeavor.
Other advantages that a franchisor may enjoy can be directly linked to the advantages that a franchisee will enjoy from a franchise relationship. Simply put, if the franchisee is happy, the franchisor will be happy.