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What to Do, Open More Locations or Franchise?

The dilemma: You have said to yourself that you are ready to take your business to the next level. Your clients and/or customers ask you all the time if you have other locations. It is time for expansion but you’re not quite sure how to do it.  So what is the best growth strategy for your business? Your choices are either to open more locations or franchise your business. Each has its own benefits and risks. Here are a few points to consider:

Company-owned expansion:

This is the best method if you ARE well-funded to open multiple locations quickly. If you open more locations yourself, you will:

  • Make more money as you retain all profits from the business;
  • Maintain control of all aspects of business operations and keep trade secrets “in the family” (find out if control freaks should franchise);
  • Have the option to share resources and employees between your locations;
  • Need to fund each location and you will be responsible for all costs;
  • Be responsible for the management and operation of each location, including hiring and training managers and employees;
  • Have 100% liability for each location;
  • Need to learn about the demographics for each location, so you can properly market and advertise your business;
  • Experience slower growth and branding as this is contingent upon how much money you have to continue opening locations. You will need to open multiple locations quickly in order to achieve effective branding; and
  • Be challenged with employee turnover and constantly be teaching new employees how to run your business.

Franchise expansion (Franchise Your Business):

This is the best option if you are NOT funded to open multiple locations quickly. If you franchise your business, you will:

  • Not have any fiduciary responsibility for each location;
  • Not be responsible for hiring employees or daily operations of each location;
  • Receive an ongoing royalty fee (read more about royalties) for each franchise rather than a share in the profits;
  • Experience royalty revenues that may be less than profits from company-owned locations in the beginning (see if you will make more money if you open more locations or franchise your business);
  • Bring into your system enthusiastic entrepreneurs who will invest their time, energy and funds into opening YOUR business in other markets;
  • Need to “let go” and allow others to operate your business (as long as they follow your standards);
  • Experience rapid expansion into markets you could not otherwise reach;
  • Experience an explosion of growth resulting in quick branding because franchisees are opening locations;
  • Have to spend resources and time to recruit franchisees;
  • Become less involved in the day-to-day operations of your business and more of a mentor, which means you will need to make yourself (or key personnel) available to counsel franchisees when they seek assistance (learn more about your involvement as a franchisor); and
  • Be responsible for creating a culture of like-minded people who you have trained and continue to mentor into success and you will be getting paid for it.

Of course, everything is not always black and white. Some things just “feel” right. It is the “fire in your belly” attitude that drives you and many other successful entrepreneurs! Passion, motivation, initiative and attitude are what got you this far. Now may be the time to harness what has made you successful in your own market so you can teach others (who have a vested interest in the business) how to be successful in their market.

Here are a few questions to ask yourself to validate your gut feeling that expansion makes sense for you (whether your think you should open more locations or franchise):

  • Are your services and/or products unique and different?
  • Is there a demand for your services and/or products?
  • Are you profitable?
  • Have you created a unique way of doing things?
  • Does what makes you different from your competitors directly contribute to your success?
  • Do you have “copycat” competitors popping up?

If you answered YES to any of these questions then obviously you are doing something right (check out other questions you should ask yourself before franchising). If you want to explore the idea of franchising your business further, call us directly at 1-877-615-5177 or contact us through our main website anytime. We will gladly talk with you and help determine if you should open more locations or franchise your business.