Why franchise a business?

Written by
Life Maid Easy Team
Published on

For existing entrepreneurs, expanding the business is always part of the goals.

But, this is not only exclusive to the ones who are already in the business. It is also something that aspiring business tycoons also yearn for.

Franchising is a booming industry. It is a sector that offers several opportunities to both franchisors and franchisees.

If you are looking for a way to widen your reach and improve your revenues, franchising is the best way to get started.

In the old days, expanding a business in other places meant having new capital to fund it. The formula is simple: get a new store but prepare for a hefty capital investment.

This is not always a feasible idea, because apparently, not all existing business owners have enough funds to do this.

So, yes! Be thankful that franchising is one option to grow your business without the need for huge additional capital.

How does the franchise system work?

The question now is how does the franchise system work to give a win-win situation between the franchisor and franchisee?

For better understanding, you need to learn first the two concepts related to franchising:

* Franchisor – refers to the owner of the business who gives right to the other party to use and sell the products and services

  • * Franchisee – refers to the interested individual or company allowed to operate the franchisor’s business

A simplified explanation of the whole franchise process is like this:

The franchisee inquires about the business to the franchisor and applies to become an eligible operator of the business in another location.

At this point, the applicant can apply for either a unit, area, or master franchise, depending on the type of franchise offered by the franchisor.

After the submission of application, the franchisor screens and approves it. Once approved, the franchisee should submit the necessary requirements to start the official franchise process.

Then, after all the necessary processes on the first phase of the franchise plan is done, the branch will be turned over to the new franchisee. This means the new owner can now operate it on his or her own, with minimal assistance from the franchisor.

While the overall process sounds easy and uncomplicated, this is always not the case. There are still several factors that may hinder its smooth operation.

Hence, you should always be on the lookout for the red flags and immediately report them to your franchisor.

Why is franchising a great business choice?

To answer the main question, we listed some of the most common reasons why franchising remains a viable option for interested entrepreneurs and vice-versa.

Lower Initial Investment

Compared with starting a start-up, franchising lets you save more on initial investment. This is because you are only paying for the proven and tested franchise business model, the brand, and the rights.

In other words, you do not need more money to do everything from scratch. You can start operating the business as long as you can pay the franchise fee, and then depending on the agreement, fullfill the rest of the other charges according to your payment scheme and schedule.

No Pressure

Yes! This is so right!

With franchising, you are not pressured to produce great results immediately. This is because the business model itself has already a proven track record on the projected ROI after starting operation.

All you need to do is to operate it according to the rules and procedures.

Well- Established Business Model

As mentioned above, the franchise system lets you work on a business that does not rely on pure luck.

Most businesses offering franchise options have proved the versatility of the business model in the market. It sets them apart from other star-up companies that are still trying to learn how to operate the business efficiently.

Turnkey Business

Learning how to become the best entrepreneur is doable. But, not everyone has what it takes to become one.

Buying an existing franchise with a functional business model in place can eliminate much of the main pain points when starting a business such as the following:

  1. Choosing a territory
  2. Finding a location
  3. Negotiating a lease
  4. Finding reliable contractors to complete a build-out on time and on budget
  5. Establishing vendor relationships
  •   6. Others

Strong Brand Recognition

Since the business has been operating for years, people already know the brand.  Hence, the brand awareness in the market is already not a problem. People will come looking for the brand, even if you do not have a hardcore marketing plan in place.

For franchisors:

Expand Without Capital

As mentioned above, franchisors can expand without the need for a capital if they offer franchising.

Business owners can expand the business without the risk of debt because the franchisee pays for all the needed capital to build and start operating a unit.

Faster Expansion

When you franchise your business, you do not need to worry about your rate of expansion. You always get that competitive advantage in the market even with existing competition.

Simplified Management

As the franchisor, you can oversee the main business operations without the need to micromanage. With all standard operating procedures (SOPs) in place, you can be at ease, knowing that your people can do their work with minimal or no supervision at all.

Versatile Expansion Option

Franchising is not only limited to certain industries. In fact, almost all businesses are franchisable. Whether you are in the cleaning industry, food, or technology, there is always a franchising spot for you in the global marketplace.

Key Takeaways

Alright! What do you think about franchising now?

Is it now part of your choices?

If yes, then it is best to do this right by assessing your franchising capability. At this stage, it is best to seek professional franchise consultancy help to ensure that not only you is prepared to start franchising, but your business model too.

Moreover, do not be overwhelmed with all of the great things that franchising can offer you. Try doing thorough research first, including studies with your competition and the pros and cons.

Above all, trust your instinct. Always remember that a missed opportunity will not do you any good. It pays to always be the first in your niche.

Subscribe to our newsletter

Subscribe to receive the latest blog posts to your inbox every week.

By subscribing you agree to with our Privacy Policy.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.