Franchising is a great, quick way to grow a business. It doesn’t require much capital, can operate with just a few employees, and comes with fewer risks and liabilities than other business models. It can increase the brand’s market share and equity and presents great opportunities for international expansion.
Not only is franchising highly beneficial to the franchisor and franchisee, but it is also of great importance to the overall global economy. If you are considering franchising your business or investing in an established franchise, read through this article to find out all that you need to know about franchises.
How Does It Work?
Franchising mainly works when a business owner, or a franchisor, licenses a franchisee with the right to run a business using the original business’ system and name. The franchisee is able to run the business for an agreed time period and offers the franchisor a fee in return. The franchisee provides the franchisor with an upfront payment or an ongoing fee, or a combination of both, depending on the system that they agree on, as well as their agreed percentage of profit or revenue.
Customer Experience
Franchises ensure a reliable and satisfactory customer experience. This is because the quality of the products, the service, the maintenance and the appearance of the place, and the employees’ values and performance, are all controlled and overseen by the brand owner. The franchisee’s only duty is to invest in the expansion of the business, provide the location, and appoint a branch manager. This system ensures that the quality and the service of that specific business remains the same throughout all branches and locations. Whether a specific business location is a franchise or a company-owned branch won’t matter to the customer as long as consistency and quality are guaranteed.
Is Franchising Popular?
There are more franchises than you think; in fact, your regular go-to shop or restaurant may be a franchise and you aren’t aware. In the USA only, there are around 800,000 franchises in over 120 different industries with more than 9 million employees. Even when other businesses suffered economic declines, franchises continued to grow. It has become the presiding developer of small independently-owned startups and businesses for several decades now. Franchising continues to create economic opportunities for entrepreneurs and business owners and creates more job opportunities for people. It also improved the quality of life as it has made many products and services available and accessible to many people on a global level.
The Perks of Becoming a Franchisee
Becoming a franchisee is much easier and cheaper than starting a business from scratch since a franchisee would be running a brand that is already well-established. The franchising experts at Franchise.com advise potential franchisees to search for a reputable, well-known business to improve their chances of success. The franchisor also assists the franchisee in finding suitable business locations, offers ongoing support, knowledge, and training to minimize risks of failure. However, franchisees must always abide by the initial agreements and may face several restrictions imposed by franchisors.
How a Business Can Become a Franchise
A business owner can either be approached by an interested party or set out to search for potential franchises themself. Franchisors need to provide the franchisees with details and guidelines on how to run the business, to make sure that the franchise runs smoothly. It is important for franchisors to hire an attorney and get expert advice on the franchising process. This is to ensure fair pricing, the protection of intellectual property, and the creation of a franchise agreement. Franchisors should be very selective when it comes to choosing a franchisee, as this person would be representing them and their business.
They need to search for someone who would have the business’ best interest at heart and would be looking to protect the brand and the business owner. A franchisor should ensure that the franchise represents the brand’s culture, attitude, and beliefs and that the quality and service are highly consistent. This is why franchisors must train the employees and carry out regular assessments and check-ups.
Franchising is highly beneficial for both the franchisor and the franchisee. On the one hand, the franchisee has the opportunity to become a business owner and generate a large amount of income for less capital and reduced efforts. And, on the other hand, the franchisor will be able to expand their business, boost revenue and profits, and expand their reach overseas for fewer costs and less hassle. Franchising is also extremely advantageous for global economies, as it creates more job opportunities, increases overall output and productivity, and makes products and services more accessible to a wider audience.
Author:
SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship.
