The Many Benefits of Franchising Businesses
The primary benefits for various companies which join franchising would include motivated management, capital, speed of growth and risk reduction but there are several other benefits too. The lack of access to capital is one common barrier to expansion being faced by the small businesses today. Before such credit tightening of 2008 to 2009 and the new normal which ensued, entrepreneurs usually found that the growth goals outstripped the ability of funding them.
Know that franchising is actually a different form of capital acquisition and this offers some advantages. The primary reason why so many entrepreneurs turn to franchising is the fact that such would permit them to expand without such risk of cost equity or debt. The franchisee would provide the capital needed to open as well as operate a unit and this is going to allow the company to grow by using resources and many more. Through the use of the money of other people, the franchisor can grow hugely unfettered by debt.
Due to the fact that the franchisee is the one to sign the lease and commit to many contracts, franchising would allow expansion without contingent liability. This would minimize the risk to the franchisor. What this means is that as a franchisor, not only do you require far less capital with which to expand but the risk is limited to the capital that you invest in developing the franchise company. This is an amount that is usually less than the cost of opening another company-owned location.
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There is also motivated management which is another advantage. Know that another stumbling block that face many entrepreneurs who want to expand is finding and also retaining the good unit managers. Usually, the business owner would spend several months looking and training a new manager and only see them leave after or get hired by a competitor. The hired managers are employees who may have such commitment to their work that makes supervising the work from a distance a big challenge.
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However, franchising would allow the business owner to overcome such issues through substituting the owner for the manager. There is no person who is actually more motivated than one who is invested in the operation’s success. A franchisee would be the owner and his life’s savings is invested in the business. The compensation would come through profits. A combination of such factors will have various positive effects on the unit level performance.
With franchising, the franchisor can function effectively with a leaner organization. Since franchises are going to assume different responsibilities which are shouldered by the corporate home office, then the franchisors can leverage the effort to minimize overall staffing.