Why Franchising a Company is the Least Expensive Option for Growth

There are times when the best way to GROW a business is to add a new location or two. And if money isn’t an issue, then opening additional company-owned locations would be the best method of expansion for most businesses (read about the differences between company-owned growth and franchising). But it can get really expensive! The cost to cover leasing, furnishing, staffing, training and marketing for other locations is far more than the average business owner can afford! Nonetheless, when money is an issue for a business owner, who has a burning desire and demand to grow into other markets, opening up additional company-owned locations is just not an option. However franchising a company when money is an issue may make sense. Allow us to explain.

Leveraging

Franchising a company may be the most affordable and effective option for growth. The costs associated with opening new locations are funded by the new franchisees. The business owner (Franchisor), in essence, has leveraged the growth of their business into other markets through the time and resources of franchisees. While there are costs to supporting franchisees during their start-up and beyond, it is far less by comparison then the cost of opening multiple company-owned locations.

Branding and Leadership

Consider the cost of BRAND awareness. How much money is spent marketing a brand? Yet, just by stepping into the role of a Franchisor, a business stands toe-to-toe with well-known franchise businesses and may soon become a household name (read more about what your role is as a franchisor). When a business owner starts franchising, is it not unusual to hear customers say, “Wow! You must be successful!” Businesses that expand through franchising have the best of both worlds: they can experience rapid growth and still maintain the uniqueness of the services and/or products that have made them successful (check out our article that discusses other advantages of franchising). As franchisees come onboard, the Franchisor is the mentor. Franchisees are in business for themselves, but NOT left alone by themselves. Branding services and product consistency is controlled by the Franchisor.

Making Money

Franchising a company will generate revenue a few different ways such as:

  1. Franchise fees are collected to compensate for training the new franchisee and all the items provided to them for a smooth entry into the business (see more on how to identify a franchise fee);
  2. Royalties are collected to support ongoing training, brand consistency, ongoing advertising and marketing initiative, product development and other such support (see more on royalties); and
  3. There may be products that Franchisees are required to purchase and in many cases the Franchisor is the supplier (see more on the different ways to generate revenue when franchising).

Give yourself time to research what kind of expansion is right for your business (learn about other options for growth)! If you are concerned about money yet still want to grow your business, then franchising may be a solution for you. Call us directly at 1-877-615-5177 or simply send us your contact information. We will gladly have a non-intimidating, non-threatening and non-salesy conversation with you to determine if franchising makes sense for you.