What is franchising?
Many business owners desire to see their businesses grow and scale over time. To make this happen, you will need a considerable amount of capital investment to stimulate your business growth. Franchising your business is an ideal marketing strategy for expanding your small business by opening up to other locations.
Franchising is a legal agreement between the franchisor and the franchisee. The business owner is the franchisor, while the franchisee is the investor. In franchising, the business owner enters into a contractual agreement with the investors to use their brand name and trademark.
The franchisee gets the legal right to sell the franchisor’s products, goods, or services in their own established franchised locations. In return, the franchisee pays initial fees and some share of revenue to the franchisor. Below are some of the benefits of franchising a business.
Benefits of franchising
Franchising is a powerful marketing strategy for expanding a growing business. Here are some of the benefits of franchising.
Franchising provides increased capital
Franchising your business is a better way of accessing capital expansion with minimal risk. Instead of borrowing money for growth, you can generate cash through the sale of franchises. In this model, you do not lose your control and it is less risky than other capital sources, such as venture capital or bank financing. Franchisors can use the fee paid by the franchisee to develop and grow their businesses.
By franchising, the responsibility of hiring and managing managers and employees shifts to the franchisee. Therefore, the franchisor gets relieved of the management difficulties and associated costs related to labour.
Accelerates business expansion over a wide area
When you franchise your business; it speeds up your brand expansion over a wide area. The franchisor can freely expand geographically using their capital, workforce, and other resources required.
Reduced responsibilities and risk
By franchising your business, you shift or share a variety of risks and responsibilities with the franchisees.
Steps to franchise your business
Here is a step by step guide on how to franchise your business.
Evaluate the readiness of your business
Several factors should guide business owners when evaluating their business. Some of these factors include;
Consider your concepts – Though franchise concepts are built on offering a similar service or product, an excellent concept usually is open to a unique twist. As a result, the idea must be appealing to any prospect looking out for a franchise.
Check your financials – Is your business making sufficient profits? A franchiser is attracted to a profitable business. As a result, their goal is to replicate your success to other areas that may require your services.
Market research – When people want to franchise their businesses, they get guidance on the demand for their services outside their market niche. It is advisable to conduct market research that will enable you to identify how your consumers spread.
Evaluate alternatives – Suppose you are franchising to raise capital. It is advisable to look out for other viable capital options.
Before you engage in this process as a business owner, be ready to comply with all the legal procedures to make the entire process successful. Have the right information and documents that will satisfy any query the authority may want to know about your business.
Decide on your model
When preparing your legal documents, you decide to showcase how you will operate as a franchisor. Some of the crucial points to consider include;
- What is the royalty or franchise fee?
- The size of the territory you are willing to award to each franchisee.
- Training programs and manuals
- Terms of agreement
- Marketing strategy
After you have done filling up the legal paperwork, submit all the documents, and be ready for any critic from the authorities. This process can take a few months, depending on the country.
Be ready to hire
As a franchisor, you will add extra staff who will dedicate their work to help the franchisee. As a result, they will answer any franchisee questions and help solve any challenges that might arise.
As a franchisor, your goal should revolve around activities that will bring onboard new franchisees. Convincing new business people to buy the idea is not easy. Thus, training your sales team will help them acquire vital technical skills. This skill will enable them to market and close new businesses with ease.
Ensure that as a franchisor, you offer sufficient training and support to franchisees. As a result, your brand will provide similar customer experiences across the board.
Do you want to franchise your business? The above are some of the steps to follow in franchising. Franchising gives business owners the freedom to run their businesses with the support and reassurance of a tried business model. Read the Franchise Consultants blog to discover more, or get in touch to find out how to advertise your franchise opportunities.