Franchising a business – Pros and Cons
Thinking about franchising a business and have no experience of franchising and wonder if it’s right for you and your business? Want to know what the pros and cons of franchising a business are? If so this post could help.
Having worked within franchising for almost 20 years I have seen both advantages & disadvantages of franchising a business, being a Franchisor twice myself as well have also experienced both sides of the fence as well! So anyway if you are considering franchising a business here are some of the pros & cons;
Pros for franchising a business
- Rapid growth is possible through franchising
- Low capital investment – For example if you business requires capital investment for machinery, premises, shopfitting etc if you plan large scale expansion funding could be an issue, with franchising your Franchisee’s ( the people that buy your franchise ) will raise the capital required at their own risk
- Flat management structure – One of the great things about franchising your business is far fewer staff. Your franchisees are independant businesses and if set-up correctly you will need only a small management structure to manage your network of franchisees as your business grows.
- International growth – Franchising makes it far easier & quicker to grow a business internationally. Usually this is achieved by creating what is called a Master Franchise Licence, effectively appointing a franchisee in the host country to operate as the Franchisor
Cons for franchising a business
- Investment in time – To set-up a franchise with experienced franchising experts is relatively straight-forward but it will require an investment of your time. Not just for the setting up of the franchise but also recruiting franchisees and all the training & support they will need from you and your team to help them succeed, this is crucial for the success of any new franchise.
- Franchisee’s, not staff – If you are only used to managing staff you will need to learn how to work with Franchisees. Managing a franchise network is not like managing staff. Your Franchisees have invested money into your brand, possibly taking out loans and leaving paid employment. They are not staff but your business partners and therefore you need to manage them accordingly. This takes time and good advice from a franchising expert to achieve.
- Control – It’s your business of course but you may only have operated in one geographic area. As your business grows and possibly diversifies as a result you will need to listen to your Franchisees and take onboard suggestions, what works, what doesn’t work etc to manage the network successfully.
- Franchisee fatigue – A franchise agreement is a long term business partnership or marriage, sometimes these do not work out for business and/or personal reasons so you need to plan and be prepared to handled this when it happens as it happens with all franchise businesses at some point.
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