The main benefits of most businesses seeking entry into franchising are capital, growth momentum, incentive management, and risk reduction. But there are many more.
The most common barrier to expansion in small businesses today is lack of access to capital. Even before credit was tightened by the recent recession, traders often found that their development goals exceeded their ability to fund.
Franchising, as an alternative form of capital acquisition, offers some benefits. The main reason most business people turn to franchising is because it allows them to expand without the risk of debt or equity costs. The franchise provides all the capital needed to open and operate a unit, allowing companies to grow using the resources of others. By using other people’s money, the franchisor can be free from massive debts.
The franchisee is the one who invests the funds to run the franchise, not the franchisor. So for a franchisor, there is very little investment in building a business other than the cost of starting a franchise.
2. Encouragement management
Many entrepreneurs who want to grow their business elsewhere need job and training managers who can run the business properly. Managers are seldom engaged in business and can be easily recruited through competition. In franchising, an owner is involved in the business because of the need to use capital to become a franchisee. These owners are more loyal to the business and therefore more likely to survive.
Long term commitment. Franchisees find it more difficult to move away from a business in which they have invested large sums of money and time.
Better quality management. Unlike managers, franchisees are long-term “managers” and they keep learning about the business and are more likely to acquire the institutional knowledge that will make that person a better operator for many years to come.
Improved operational quality. Franchisees are usually more proud of their ownership than managers. They will keep their places clean and better train their employees. They are also more concerned about the clients they serve because they tarnish the client’s satisfaction.
Innovation. Unlike franchise managers, they tend to look for opportunities to improve their business.
Franchisees are generally more concerned with saving money through controlled costs.
3. The pace of growth
For some business people, franchising may be the only way to ensure that competitors occupy a market-leading position before they can infringe on their position, as the franchisee does most of the work. Franchising not only allows the franchisor to benefit financially but also allows human resources to benefit. Allows franchising companies to compete with larger businesses so that they can satisfy the markets before these companies respond.
4. Staff leverage
Franchising allows franchisees to work more efficiently with a more lean organization. Since franchisees will take on a lot of responsibilities, otherwise through the corporate home office, franchisees can then take advantage of these staffing efforts.
5. Ease of monitoring
The franchisor is not responsible for the day-to-day management of individual franchise units. At the micro level, this means that if a shift leader or staff member calls in the middle of the night when they are sick, they are calling your franchise – not you. It is the franchise’s responsibility to find an alternative or cover their shift. If the franchisee chooses payroll payments that are not market-appropriate, employing their friends and relatives, or spending money on unnecessary or illegal purchases, it will affect you or your financial return. Will not put By eliminating these responsibilities, franchising allows you to direct your efforts toward the big picture.
6. Increase profits
It is easy to overstate the benefits and oversight of the staff that franchise organizations are allowed to operate in a highly profitable manner. Because franchisors can rely on their own franchisees for site selection, lease negotiation, local marketing, employment, training, accounting, payroll, and other human resource functions, the franchisor organization is usually very lean. The bottom line is that a franchise can be more profitable.
7. Better value
The combination of rapid growth, increased profits, and increased organizational control leads to the fact that franchises are often valued more multipurpose than other businesses. If you decide to sell your business, the fact that you are a successful franchisor who has established an expanding growth model can definitely be beneficial.
8. Infiltration of secondary and tertiary markets
There are some serious implications for franchisees’ ability to improve unit-level financial performance. A typical franchise will not only be able to earn more than the manager in a similar position, but will also keep a close eye on expenses. Usually the price of a franchise will be a different structure than what you do as a franchisor. Even after calculating the royalties paid to you, the franchisee can often run a unit more profitably.