The Pros and Cons Of Franchising Your Business – Birds on the Blog

The Pros and Cons Of Franchising Your Business

If you’ve started a business and see it grow to be quite a profitable venture, one of the many considerations you can have for its future growth is to expand it as a franchise. Of course, this is not something you can decide on with a blink of an eye, as there are surely a lot of things to consider before taking on such a big step. This article will provide you a quick rundown of the various pros and cons of franchising your business – and hopefully help you decide if this is a viable step for your business.

Here are a few numbers to get you started. Did you know that there are actually more than 3,000 different franchisers in the United States alone, and over 900,000 franchise businesses actually exists in the U.S.? This has generated more than 18-million jobs and even provided more than $2.1-trillion for the economy. If you’re thinking about making your business a franchise, you’re not alone in this endeavor. In fact, did you know that one franchise business actually opens every eight (8) minutes of each business day? Moreover, one of every 12 businesses located in the United States is a franchise business. This means if you think the cards are right, making your business a franchise can actually be a viable move.

Franchising: A Quick Recap

If you’re new to franchising, then here’s a quick recap for you. A franchise is a commercial and legal relationship between an organization or individual (called a franchisee) that wishes to use the identification of an advertising symbol, brand name, service mark, or trademark (the franchisor). The franchise is generally the thing that dictates how the two parties should be conducting their business. In short, a franchisee is in charge of selling services or goods supplied by the franchisor, or the same goods and services that meet the standards of the franchisor in general.

If you’re looking for more specific pros and cons on how to franchise your restaurant or other businesses, here are some that are worth considering:

Pros And Advantages: Tapping Into Growth, Expansion

Perhaps one of the key points of franchising your business is your opportunity to tap into your brand’s ability for growth and expansion through various means. Instead of solely relying on you and your team’s efforts to grow, you can tap into a wide array of talents and capital in order to grow quickly.

  • Tap into better talent: Franchising your business is a great way for you to find talented individuals capable of managing different locations. Individuals that are most qualified tend to run a business in return for growing said business instead of relying on salary, which means you’re likely opening your business up to meet individuals you may even consider adopting into your main team.
  • Tap into capital much easier: Franchising your business is a good way of earning expansion capital without jeopardizing your own assets. Since franchises pay you to buy their outlets, you can get yourself out to various branches without needing financing from investors and banks, and without having to release your own capital.
  • Tap into growth without too much risk: Another appeal of franchising your business is that it can give opportunities to give higher financial gains with less risks, as you’re relying on other managers to do branch management for you. If you have a good model in your hands, you can get a lot of royalty from those outlets while helping other individuals as well.

Cons And Disadvantages: Risks And Dealbreakers

Of course, as there are pros and advantages to business decisions, there are cons and disadvantages. Some people might be discouraged to franchise their business because of various risks involved in the process.

  • Not much control over management: Given that franchises pay you to get outlets out to different locations, you have less control over how they’re managed compared to if you set up the branch yourself. Franchisees tend to be independent, and they may have different goals than you. For instance, as a franchisor, you’re most likely going to collect profit from royalties. Franchisees, however, will make money from the outlet’s various profits. As such moves on your end to boost sales but not profits may create conflict between franchisor and franchisee.
  • Weaker community for your company: It’s challenging to get franchisees to work together compared to managers you actually hire. Franchisees have different goals compared with one another, and as such they may not “synergize” if you want your brand to adopt a particular image. This can be a dealbreaker on your growth if you don’t plan for this eventuality carefully.
  • Challenges for innovation: It can be challenging innovating with a franchise compared to having your own business. For the latter, you can simply implement changes you want. For the former, however, you may have to negotiate with franchisees to get them to sell your new product or service.

The Takeaway: It Depends On Purpose, Timeline, Resources

Perhaps if there’s anything this article may have shared, it’s that franchising your business for success needs to take in a lot of considerations for it to be a fruitful venture. Not all businesses that transform into franchises can be profitable immediately, and not all franchises work for their respective businesses in ways that are desirable. As such, you need to assess the goals of your business, your timeline to achieve your respective objectives, and the resources you’re willing to allot (among other things) before fully investing on transforming your business into a franchise.

Cedric Errol
Cedric Errol loves writing about various niches, including business and finance, and this shows even in his works as a contributor for The Franchise Maker. His penchant for creative and imaginative pieces reflect with the voice and tone he uses with his articles, which he hopes transforms otherwise mundane topics into interesting and entertaining things to read. He loves reading when he has free time.

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