Franchising can be a great way to grow a business without adding significantly more capital or cash, as you grow with the input, ideas and investment of more people working in the business: franchisees.
There are many benefits to franchising
Franchising a business requires establishing a model. When a person buys a Franchise, he or she is purchasing someone else's "system", trade name and learning curve. In return, the Franchisor receives money, normally both an Initial Franchise Fee and weekly or monthly royalties. In its purest form, Franchising has been called the classic win-win situation. Both the Franchisor and the Franchisee succeed.
Expanding a business and the benefits of Franchising to the Franchisor include:
Franchise Fee - Profit Potential
Franchisors often generate substantial profits from their Franchise operation, including the Initial Franchise Fee and on-going royalties or service fees. Other potential profit centers include the sale of products or equipment, sales of international licensing rights, leasing real estate and/or developing financing programs.
Franchisee's Create Fewer Managerial Problems
Franchising creates the most motivated managers in the world - Franchisees who have invested their money and time into their own futures.
Few companies have the strength necessary to penetrate and dominate a new market quickly. A Franchisor can develop new areas using the financial and managerial resources of its Franchisees, rather than investing its own money, time, personnel and energies.
Franchising Allows For Lower Capital Expenditures
The expense of expanding a business can be overwhelming. By selling a Franchise to a motivated owner, the Franchisor eliminates almost all of the costs normally associated with opening new locations or expanding.
Franchise Businesses Have Lower On-Going Expenses
The fixed and variable expenses involved in running a Franchise company are much lower than operating a similar number of company-owned facilities.
Franchising Creates - Marketing Advantages
As local, regional and national campaigns take effect, all locations benefit, including company-owned units.
Franchise Buying Power - Economies of Scale
The more locations a company has, the more buying power it commands. It is also easier to secure desired sites.