When you’ve poured all your blood, tears, sweat, and cash into a business, you’ve finally reached the point of it being successful, and you’re ready to expand to bigger and better things, you’ve likely begun to ask a very common question:
What are the benefits of franchising my business?
As with all major business decisions, it’s important to fully understand what you’re getting into before you consider transforming your business into a franchise. There are loads of great benefits to franchising, with the main ones being capital, the ability to create rapid growth, the reduction of risk, and a highly motivated management team.
Here are the top ten benefits of franchising and why you should consider it for your business:
Without doubt, the biggest barrier (save perhaps COVID-19) faced by the modern small business owner is the difficulty of accessing capital. Even if we go back to a time pre-corona, or even before the credit crunch of 2008-2009, many entrepreneurs found themselves stymied by the fact their goals for growth vastly outstripped their funding capabilities.
By franchising your business UK, you’re accessing an alternate means of capital acquisition, and this is the biggest reason so many entrepreneurs turn to franchising: it provides the ability to grow without the cost of equity or risk of debt.
#2 Lower risks
This alternate source of funding lowers the risks you are taking by expanding. Rather than your own money, your franchisees are the ones stumping up the cash. When you set everything up properly, you effectively protect yourself from loss of income even if you have franchise units that ultimately fail.
Few choose to structure their franchise in a way that doesn’t place the investment responsibility on the franchisee, who is also responsible for premises, leases, and liability for anything that takes place within the unit itself in terms of litigation.
#3 Greater profits
Once you have a good roster of high-performance franchisees, you’ll see exponential income growth as a result of the fact your fees are based on revenue, not profit. This means you don’t have to wait for each unit to become independently profitable to start seeing income from the venture yourself. And the more franchisees you add to your roster, the more money you will make.
#4 Dedicated business partners
One of the most troubling aspects of business is finding a business partner who will carry their own weight. Franchising your business makes a huge amount of sense in this regard, as your franchisees are putting their own capital on the line. As a result, they will be dedicated to making their unit a success and ensuring the efficient operation of their part of the business.
#5 Motivated management
Franchising effectively gives you direct access to a team of highly motivated management professionals. This is another huge stumbling block when it comes to growing a small business, as finding competent managers and retaining them can be extremely difficult.
When you franchise, you gain built-in, highly invested managers. Your franchisee is an owner in the business, and will frequently have invested their own savings – if not life savings – into the business. Any profits they receive will be directly proportional to the competency they demonstrate in their role.
#6 Rapid growth
When you franchise you also have the potential to open new locations in far-reaching areas on a much more rapid timescale than you’d achieve alone. Rather than opening one new location at a time, you’re in a position to have multiple new units starting simultaneously.
The recurring nightmare of every entrepreneur is that they will create the perfect product or service, but someone else will beat them to market.
#7 Lean potential
There are a lot of market benefits to franchising beyond simple growth. Most franchisees have the ability to improve financial performance on a unit-level. Beyond this, they’re also able to boost revenues beyond what could be achieved by a manager (rather than an owner) at a simpler location and generally keep a much closer eye on expenses. In addition, franchisees generally have a different cost structure to that which you will use as a franchisor. They may not offer benefits packages to employees and are likely to offer lower salaries in general.
As a result, franchising your business allows you to run a far leaner organisation across the board.
#8 Ease of supervision
There are other staff benefits to being a franchisor in that you’re not responsible for managing individual units on a day-to-day basis. You’re not going to have to deal with workers calling in sick; that call goes to someone else. Your franchisees are the ones responsible for finding someone to cover their work, considering if disciplinary action is required if they’re frequently off work, and ensuring everything runs smoothly despite the absence. Whatever their choices in terms of staff supervision and management, they will never impact your financial return from their unit.
This effectively means you can stop worrying about micro-level management and focus on the big picture.
#9 Improved valuations
When you combine fast growth, greater profitability, and an increased level of organisation, you begin to see why franchisors are frequently seen as higher multipliers compared to other business models. Should you decide to sell your business, having an established and scalable franchise in place is a huge advantage in terms of the value of your business.