Franchising a business is a method that has greatly enhanced the performance of many corporations and small companies. It has enabled many companies to expand rapidly and profitably, with good long-term stability. Franchising is a format which is adaptable to many different areas and types of business.
Franchising a business – Key details
Pace
Franchising a business can provide faster growth. A company can often accelerate its growth by using a franchise business format – rather than just adding branch outlets as funds allow.
People
Franchise owners, more often than not, out-perform branch managers. A franchisee not only has the extra incentive of not having a limit on their earning capacity, but they have invested money for the franchise which needs to be protected, thus ensuring continuing sharp focus.
Resources
The franchisees provide most of the money for the expansion – much of which is paid in advance. Franchising a business is a smart way to raise capital.
Systems
Franchisors usually have superior systems that have been tested and proven giving franchisees a flying start and a continuing advantage.
Lower Risk
When Franchising a business it is the franchisee who provides the capital and who owns the outlet, thereby bearing most of the legal and operational risks.
Advertising & Promotional Power
As a franchise chain expands its marketing budget grows more powerful. This allows a franchise system to get more value for their advertising dollar.
Buying Power
As the franchise system expands, quantity discounts become larger providing individual franchisees with the opportunity to buy better, to sell better, and to profit.
Quality Control
Quality control is better because the franchisor has the legal power to monitor franchise outlets and to ensure that franchisees keep them up to the prescribed standard.
A Solution to Dealer Problems
Hard working, focused franchisees can replace apathetic, under performing dealers or agents who may also be marketing other products or services.
An Exit Strategy
Franchising a business can enhance the growth and profitability potential of a business which often results in a more saleable proposition for both franchisor and franchisee.
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