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

Financial advantages

•       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.

  

Marketing advantages

•        More innovations

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 company’s 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.

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