Benefits of Franchising My Business UK
Have you asked yourself: “what are the benefits of franchising my business”? Or even asked yourself: “Why franchise my business?“. The idea behind franchising is to expand your brand by allowing others to start their own company under a reputation that has first been established by you. Franchising provides support for every aspect of running a business and is a quick and cost-effective method of expansion. The alternative is to open further company outlets, but this means more work and wouldn’t give people the right to run their own business under your brand, taking care of all of the day to day running for you. By the time you decide to franchise, you should have already gone through the process of gaining customer loyalty and establishing your brand before you allow someone to replicate that success from their own business. It’s also important that a company is teachable and transferable, as there is little point in deciding to franchise a business that limited people can operate.
Many of the most well-known brands are franchised, for example, McDonald’s, Dominoes and Thorntons. McDonald’s has a brand value of over 130 billion and keeps around 82% of the revenue generated by its franchisees, of which there were 36,059 reported in 2019. While this is an example of franchising on a huge scale, McDonald’s proves that the concept can be extremely beneficial to a business. Plus, it’s always good to have something to aspire to. Here we pinpoint some of the biggest advantages that come with franchising your business:
Speed of growth tends to increase
Even though you may have come up with the newest, most innovative business idea, there’s no guarantee that someone won’t come up with the same one. In this case, it’s a race to the market, and sometimes opening up a single unit can take up more of this valuable time. Franchising can often be the quickest and most effective way to become leaders of a market, as a franchisee can usually be left to take care of these tasks. Even if you’re competing against a much larger business, having multiple franchises can put you on top if you take over the market before any competitors can attempt to steal this space.
You’re not responsible for the everyday management of individual franchise units
When considering franchising your business from a management perspective, there’s more ease of supervision meaning you can focus on overseeing and promoting the brand in general. It’s easier to think of the bigger picture for your business, as you have individual franchisees to take responsibility for their staffing and spending matters, meaning your time can be spent more effectively. You also won’t need to worry about lack of motivation within the management. In most cases, a manager has little loyalty to a business, and could easily choose to leave you to work for one of your competitors if offered a higher salary. With a franchisee, the manager is not just the manager, but also the owner. Being materially invested in the unit’s success, they’ll have a genuine commitment to the job and will be personally interested in seeing the business succeed.
Franchise organisations tend to be highly profitable
As a franchisor, you can depend on the franchisee to deal with certain tasks such as site selection, local marketing, lease negotiation, hiring and payroll. This means that a franchiser’s organisation tends to be much leaner, and tends to leverage off the organisation that is already in place. Overall, this tends to make a franchise more profitable. Some of the biggest brands in the UK have reported a 30% upturn in their store revenue when a company-owned store becomes a franchised one. In general, it also means that as a franchiser, you are less at risk. If you follow the traditional structure of franchising a business, it is the franchisee that invests in the franchise unit. They also have responsibility for any working capital needed to establish their business, meaning as a franchiser, you can expand to a multitude of units without having to spend any of your capital on expansion.
This fact, combined with the increased speed of growth mentioned above leads to an improvement in valuations. This means that if you ever consider selling your business, you’ll be valued at a higher multiple and will often have an advantage, having established a scalable growth model.
A way to replicate a successful business
It’s important to remember that to create a franchise, your business has to be running successfully before you take this next step. Franchising won’t solve issues for a business that is struggling, if anything, it could make these worse. Franchisees should be replicating a proven, successful company. They also require significant financial investment meaning your business must be profitable and transferrable across locations before you consider creating a franchise.
If you’re looking to expand your business, franchising can be an excellent option. Take a look around the Franchise Consultants UK website and find out more about how to franchise my business UK.