Today, if anyone thinks of establishing or expanding a business, the first choice that comes to mind is franchising. What makes Franchising favourable? Let’s find out
The ideal way to expand a business is via franchising. Business owners provide a developed platform for the franchisee to establish a branch of the same. The franchisor is obliged to provide the respective resources, system, guidance, employee training programs, and other necessities in exchange for a franchising fee.
The medium of franchising provides an efficient path through which a particular business reaches many corners of the market with its products and services. The brand name gets properly established in the market due to manifold exposure. It can be a viable option for an established business to reach out to a new market by targeting a new audience. This is a feasible method to expand your business where you can create a relationship with the franchisee by providing the established reputation of your brand. This typical business model can benefit both the parties and make a huge impact in the market.
Advantages of franchising your business
Almost all the national and international brands perform to give an astronomical outcome by following this business model. The advantages of this business model are mentioned below.
Cost-effective solution for expanding your business
A second party investment can reduce your tension of arranging finance to open new branches of your business. If you provide a franchising option to the aficionados, you will be able to enjoy the prerequisites for an established location. The candidate must have analyzed that the competition for your business is very less in that particular area. This is why he has approached to seek a franchise of your established brand. You will not have to spend hard-earned money on establishing a new venue to cater your goods and services. The capital will be arranged by the franchisee and you will earn good brand value from it in a cost-effective way. It is an ideal way of capital acquisition without involving any debt risk or equity cost.
Support in the marketing field
The franchisee will be providing a vivid study of the location which means majority of your homework is done. Opening a new branch of your business means a long-drawn process of market survey and identifying the most effective marketing medium to promote. No guesswork is required to start a new venture in a new location.
New source of revenue
The legal obligation of a franchising deal suggests that you will enjoy royalties after every cycle. Depending on the terms and conditions of the deal, you will be able to enjoy a different source of income in the form of royalties every month or annually based on the gross sales.
Flexible agreements and growth
You can fixate on the terms and conditions of your agreement as per your business expansion requirements. You can either focus on a low-key regional growth or a national expansion plan. Depending on your specific needs, you can improvise the agreement and include the best interest of the franchisees as well. Your control over the franchised branch will be reduced. They will agree to abide by your instructions and training, but you will not have the power to make changes in the business or intervene in the process.
Advantages of a franchisee
A franchisee will enjoy the reduced risk of failure as the brand is pre-established. The business has been running on a proven track which is why it will become easier for the franchise to commit. The goods and services, on the other hand, are tested and established in the market. Selling an established brand is a lot easier than a new one in the market.
A franchisee will not be eligible to recruit and train employees as per company norms. It will be done by the franchisor alone. All he needs to do is to provide the space and financial resources to come up with a fruitful venue. The franchise option also enables a business to participate in the competition by providing its brand name. Similarly, the franchisor will be unable to set up another franchisee in the same area which means the existing franchisee will enjoy a concentrated market.
Franchising is an ideal way to multiply your business by providing a feasible platform to the small businesses to grow and promote your brand in the locality.