In general, companies decide to begin franchising for one of three reasons: lack of money, people or time.
The primary barrier to expansion that today's entrepreneur face is lack of capital. And franchising allows companies to expand without the risk of debt or the cost of equity. Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franshisor. In addition, since it's the franchisee, and not the franchisor who signs the lease and commits to various service contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing a franchisors risk.
The second barrier to expansion is finding and retaining good unit managers. All to often, a business owner spends months looking for and training a new manager only to see that manager leave or worse yet, get hired away by the competition.
Franchising allows the entrepreneur to over come many of these problems by substituting a motivated franchisee for a unit manager. Interestingly enough, since the franchisee has both an investment in the unit and a stake in the profits, unit performance will often improve. And since a franchisor's income is based on the franchisee's gross sale and not profitability, monitoring unit level expenses becomes significantly less cumbersome.
Finally, opening another location takes time. You will have to go hunting for sites, lease negotiation, arrange for design and build out, secure financing, hire and train staff, purchase equipment and inventory. The end result is that the number of units you can open in any given period of time is limited by the amount of time it takes to do it properly.
So for companies with too little time, or too little staff franchising is often the fastest way to grow. Please fill out the questionnaire below, connect with us and get a free consultation to see if franchising is right for your business.