10 reasons to take the next step in franchising

FDS Northern Franchise Consultant Tony Urwin explains his 10 reasons why your business could benefit from taking the franchise route

Already running a successful business? Wondering about the best way to expand and how to take the next step? Consider franchising:

1. Achieve faster national expansion
Having established your business as a franchise, your network can grow more quickly because new outlets will be funded by your franchisee's own capital. The overheads and expenses associated with opening company-owned outlets are replaced by the cost of your franchisee recruitment, training and launch assistance - costs which are considerably lower than the working capital needed to establish each new outlet.

2. Attract motivated and dedicated business entrepreneurs.
By the time you recruit a franchisee they will have been through a rigorous selection process and you will be certain that they have the energy and drive to take your business forward in a new location. You will benefit from the ambition of owner operators and, especially in the case of small or one-person enterprises, you will be able to maintain your service standards. Your franchisees will probably be more motivated and effective than a salaried manager because they have a vested interest in the business; their livelihood depends on it.

3. Reduce your competitors' abilities.
Customers are often attracted to something new and may be initially drawn to your brand out of curiosity. However, if you can provide a product or service which is better than the one they used before, they are likely to stay loyal to your brand.
Franchising allows you to expand in a structured fashion, allowing you to pull in your competitors' customers and hopefully retain them, as long as your products and services are good enough.

4. Maintain a uniform service to customers
Franchising is all about following a system. As your franchisees will be following the same system, customers throughout the network will receive the same high quality service you currently provide, irrespective of location. They will always know what to expect from your brand.

5. Acquire local knowledge from Franchisees.
Expanding your business into new areas generally requires a great deal of research. Expansion through franchising passes the main responsibility for evaluating a new territory onto the franchisee, who is likely to already possess a great deal of valuable local knowledge. This can be particularly beneficial if you are looking to expand into foreign markets. By using indigenous franchisees, you can tap into local business knowledge which you may otherwise have been unable to obtain.

6. Capitalise on group purchasing strength.
Centralised buying allows your entire network to benefit from volume discounts that an independent trader would be unable to obtain. As a result of this, your franchisees will be able to offer more competitive prices which will help to increase your market share.

7. A dedicated distribution network.
If you are a manufacturer or service provider, establishing the sales function of your business as a franchise operation provides you with a distribution network that is entirely focused on the supply of your product or service to your customers.

8. Share the headache of management resources.
A company owned chain of outlets requires extensive management and you would be required to organise the hiring, training, motivation and retention of competent staff.
If you choose to franchise your business, you pass this responsibility on to your franchisees. The benefit to your franchisees is that, as their franchisor, your management expertise can be shared across the entire network for the benefit of all.

9. Increase your advertising power.
As your network develops, all of your outlets can benefit from the group's marketing initiatives, both at a national and regional level. A positive network spirit will encourage franchisees to help each other through referrals as customers become increasingly familiar with your brand.

10. Improve your profitability.
If you choose to expand your business through franchising you may find that the return on your investment will increase. A franchisor's profits are generated on a much lower capital investment, and although the revenue received from franchised units is less than that from company owned outlets, a higher percentage of that revenue is profit.

As you can see, franchising can be an effective and rewarding way to expand your business. However, franchising should never be viewed as the easy route to business expansion. As a prospective franchisor, you must be ready to invest time, effort and money into developing your franchise system in the correct manner. Seeking the right help and guidance at an early stage is crucial if you want to maximise your chances of success - that's why you should always consult franchise experts from the start.