Franchising a small to medium sized business is a proven way to regionally expand, stabilize operations and take on strong competition. Many business owners want to franchise, but they are unsure about the proven benefits and potential drawbacks. Before any business owner decides to franchise, they should carefully review the following pros and cons.
A franchise offers customers and potential buyers solid evidence that the business model works. One of the biggest benefits of franchising is the product or service will already have public awareness or acceptance. Expanding a business through a franchise will allow the original business owner to safety explore and establish their brand in a new market through the efforts of a new franchisee. This reduces the original business owner’s risks while generating valuable research data.
The original business owner must carefully monitor the new franchisee in order to understand customer, competitor and market dynamics. A business owner can actually establish their own franchise in a nearby area if the new franchise is successful and if they collect the right information. Be aware that potential buyers may want to review past viability studies or research in your target market.
Advertising and Marketing
Business owners who expand beyond their local area will acquire regional advertising that will strengthen their own business. Successful franchisors can financially collaborate with their franchisees to pay for advertising and marketing campaigns. A new franchisee’s innovative idea may even result in new advertising materials, channels and techniques.
One of the best benefits of franchising is establishing a brand name and company presence in a new locality. Franchisee owners who struggle to offer consistent quality, customer service or operational management may actually damage the brand’s reputation. New franchises should indistinguishable from the home company, but customers should be made aware of local ownership and practices. As long as you find the proper type of franchisee, such as someone who is flexible and collaborative, advertising reach and marketing efficiency should improve.
Employee and management training is essential to the success of any franchise. However, training programs shouldn’t be limited to temporary sessions during orientation and business set up. Instead, franchise training is a continual process that will keep the new franchisees aligned with a franchisee training program. Be aware that constant employee training, issuing updated policies and visiting franchisees to inspect operations will cost money. This is a necessary evil because adequate training will provide franchisee management with the ability to properly handle customers, compliance, finances, employees and new technology. Proper training will increase skills and confidence when franchisees feel supported. On the other hand, a new franchise will expand access to more talent. The original business owner can hire talented staff to manage their new locations as long as they provide hiring and supervisory support to their franchisees.
Concerns and Caveats
Franchising your business may come with certain drawbacks. For example, you may lose control over your brand, operations or franchise when there are many independent businesses involved. Democracy is wonderful, but having to reach a consensus among four to six entrepreneurs who want to go in different directions will be hard. The more you franchise, the more you will have to relinquish control. The best way to avoid these problems is to carefully choose franchisees who are driven to succeed, but also very conciliatory and unselfish.
Operational details and requirements are explained in franchise agreements. Any ambiguous terms or clauses may cause disagreements and even legal conflicts. You can avoid this through having a franchise lawyer carefully review and approve all documentation. For example, a lawn doctor franchise should take extra precaution with mandatory safety training requirements and standards.
In the end, franchising a business is a proven way to expand operations while minimizing risks and financial strain.