Why franchise ?
Deciding to franchise your business is usually a strategic move. By franchising your business you will need to be committed to the plan and be aware that you will not have complete control over franchisees. Franchising can only work where there is a WIN/WIN situation.
Franchising does have its pitfalls. One of the most common is franchising a business without adequate structure or a deficient systems. This causes conflicts in operation and ultimately a strain in franchiser/franchisee relationship. When operational aspects are not well incorporated in legal documents or the agreement lacks detail, serious problems may arise. With franchising, a mistake is amplified many times simply because there are many franchisees.
BENEFITS IN FRANCHISING YOUR BUSINESS
Enhanced net value of your company
Expand your network with minimal capital investments as compared to a company expansion
Reduced financial risk and strain in expansion and operation
Improved cash flow from franchise fees, royalties and supplies
Savings from bulk buying / economies of scale in purchases and production
Low network maintenance cost compared to maintaining a network of your own
Savings from effective stock management
Lower marketing and advertising costs per unit
Reduction in administration and operations cost
High rate of return of investment on franchised outlets considering your investment
Profit from fast and wide coverage of geographical area
Franchising allows you to speed up expansion and cover a wider geographical area that otherwise you may not have managed on your own. Instead of letting the opportunity slip by in a profitable location (which may be in another region) or, let your competitors beat you to it, franchising offers a viable solution.
Wide coverage also means you profit from locations, which you may not have the financial, human resources or local area expertise to go into or develop. The franchises of Uniglobe Travel [International] Inc., managed 900 units within 12 years, Coverall North America Inc., has 3500 franchisees in 10 years, while Budget Rent A Car franchising since 1960, has almost 4000 outlets around the world.
Having franchisees is very much like having a lot of highly motivated partners. Many innovations were created by franchisees. Among some of the big ideas contributed by franchisees were Big Mac' and Fillet O'Fish of McDonalds, Holiday Inn Crowne Plaza - the up-market version of the original and the cash control and security deposit machine of Seven-Eleven.
Enhance your corporate and network image
Unlike corporates and multi-nationals, smaller local operations pay little attention to corporate identity and image projection. The importance of this powerful tool is seldom realized or often misused.
Marketing edge over competitors by expanding faster
Market share (and not increase in sales turnover) is the most accurate indication of growth and market dominance. Having more of the market portion means a stronger position for the future.
Collective resources for marketing and advertising efforts
A network of stores has more financial and creative resources than a single unit.
Instant local area knowledge and contacts through franchisees
More aggressive local marketing and sales efforts through franchisees
Moving into a new territory requires applying management controls and marketing expertise of that area. When franchises, these two problems are solved.
Management and Operational Advantages
Reduced risk of management fraud
Solves the problem of finding good employees to run the outlets
Eliminates the difficulty of sourcing for the right employees at the right price.
Working with highly motivated and capable people keen to succeed in business
Free yourself from ground operations
Able to concentrate on directing the companys growth.
Professional management and operations through development of systems
Most small and medium sized companies lack professional systems e.g., retail, outlet management, training, accounting system and inventory etc. Effective management systems can also save money for the company besides providing a smoother operation.
Greater control over product quality and service because of franchisee's vested interest
Greater loyalty from franchisees
As opposed to dealers and other distribution channels, franchisees tend to be more faithful as their entire business is dependent on the franchisor.
No 'employee problems'
It will help solve the largest headache of today's business world -- getting able employees. Franchisees are usually responsible to manage their own employees.