10 reasons to franchise your business
If you own a business which could replicate its success on a national scale, developing a franchise could offer the most effective route to capturing the UK market. Here are 10 advantages that franchising provides over direct expansion
1. FASTER NATIONAL EXPANSION
Once you have established your business as a franchise, your network has the potential to grow quickly with the franchisees' capital funding the new outlets. The overheads and expenses associated with opening company-owned outlets are replaced by the franchise recruitment, training and launch assistance at a lower cost.
2. BETTER MOTIVATED OPERATORS
By deciding to franchise your growing business, you are able to benefit from the franchisees' ambition, energy and commitment to the business and its standards. Franchisees are more motivated and effective than a salaried manager because they have a vested interest within the business.
3. GET THE EDGE ON COMPETITION
Customers are often attracted to a new idea and will stay with a brand if the product or service is as good as, or better than, that supplied by their previous provider. By quickly expanding into new geographical areas, you are well placed, providing your product or service is good enough, to take your competitors' customers and keep them.
4. EFFECTIVE QUALITY CONTROLS
Franchising is all about following a system. As all of your franchisees are following the same system, customers throughout the network should receive the same high quality service, irrespective of location. That way the customers will always know what to expect from your brand and that encourages loyalty.
5. RATIONALISES MANAGEMENT
Running a franchise system requires less management than a company-owned chain of outlets since hiring, training, motivating and retaining competent staff are all functions handled by the franchisee, not the franchisor. This means you can get a better edge on competitors unable to operate with a compact management database because they need to spend more on this element.
6. LOCAL KNOWLEDGE FROM FRANCHISEES
When you expand your business into new areas it is essential for you to conduct extensive research. However, when you expand through franchising the responsibility for evaluating a new territory is passed on to the franchisees. They may already possess local business knowledge and by using their expertise you have a clearer insight into the local market. This practice is particularly useful when expanding into foreign markets.
7. GROUP PURCHASING STRENGTH
Centralised buying enables your entire network to benefit from volume discounts that an independent trader is unable to obtain. This means franchised outlets are in a better position to offer competitive prices, which will help to increase your market share.
8. 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 entirely focused on the supply of your products or service to customers.
9. MARKETING POWER
As your network develops, all of your outlets can benefit from the group's marketing initiatives, at both a regional and national level. A positive network spirit will encourage franchisees to help one another through referrals as your customers become increasingly familiar with your brand, expanding on a national level.
10. IMPROVED PROFITABILITY
Return on investment is likely to be higher for a business that has opted to expand through franchising. This is because less capital is employed and the franchisor's profits are generated on a much lower capital investment. So although the revenue received from franchised units is logically less than from 100 per cent company-owned outlets, a higher percentage of the revenue is actual profit.
Reported by Roy Seaman CFE