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Is Franchising the Next Step for Your Business?

November 2016

In principle, franchising is a relatively simple concept and has the potential to yield profitable results. Often viewed as a means to ‘fast track’ growth, could franchising be the next step for your business?

What is franchising?

The British Franchise Association defines franchising as “The granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor.”

What are the key advantages to franchising my business?

Franchising has proven itself to be an effective way of expanding a business while posing only minimal risk. Franchising can generate high-value returns and grow the number of locations your business operates in without you having to dip into much of your own capital. This is because franchisees buy outlets from you, meaning you only pay very little for opening a new outlet compared to opening one yourself.

It is considerably less time consuming to open franchised outlets than it is company-owned outlets, as it is entirely owned and managed by the franchisee. For many, franchising has enabled their business to grow to heights otherwise unattainable.

Some of the largest, most well-known businesses are franchises, such as McDonald’s, Subway, Anytime Fitness and many, many more.

What are the key disadvantages to franchising my business?

Of course, you can’t have your cake and eat it too. There are some disadvantages to turning your business into a franchise. Perhaps the main disadvantage and the reason many people are put off by the idea is that you have to be prepared relinquish a great deal of control.

If you decide to franchise your business, you must accept the fact that you can’t tell your franchisees what to do the way you can your employees. Franchisees are independent business owners and are within their rights to take their business in any direction that’s in line with their goals – and their goals may not necessarily align with yours.

It’s worth bearing in mind that franchising can present innovation challenges. If you come up with a new idea for a service or product, you can’t make your franchisee accept it. You will have to negotiate with them to accept it. Once again, it is their business, you simply allow them access to your branding, internal systems and business model.

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