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Most
businesses that choose to franchise do so because they face at
least one of these three limitations: -
Capital - They lack large amounts of capital or have other
corporate priorities for investment, which conflict with expansion
goals. It is difficult to grow any business without the necessary
capital. Opportunities can be lost and competitive advantage
squandered unnecessarily.
People - They have problems in recruiting, retaining, or
motivating good managers, agents or staff. They perhaps experience
difficulty in managing large numbers of personnel at a distance
from company headquarters.
Time - They need to expand more rapidly than traditional
methods would normally allow. It is impossible to be in two
places at the same time and one can only deal with a limited number
of issues without compromise. Ultimately the business could be
compromised and performance may suffer.
Franchising
helps to overcome all three issues in the following manner:-
With capital resources, the Franchisor actually has
Franchisees who participate by providing both start up and working
capital for the business. The new Franchisee conventionally signs
the lease, buys the plant and equipment, pays for the stock and
provides the working capital to operate the business.
In short, the Franchisee accepts full financial responsibility for
establishing and running the new business unit, and is prepared to
pay an amount by way of an initial franchise fee and an ongoing
service fee for the opportunity.
With people, quality and commitment count. When a
Franchisee makes an investment using his or her own money in a
franchise business, commitment then follows. Moreover, almost
all successful Franchisees directly manage their businesses
themselves. No wonder most Franchisors see their Franchisees
as more motivated team members than employed staff.
In providing time for growth, franchising gives an edge.
Franchised growth relies far less upon access to capital and
human resources than do other methods of expansion.
Franchising facilitates both market penetration, and
efficient market saturation.
In addition to the outside capital, the right people and the
capacity for rapid growth in minimal time, franchising can provide
other significant advantages:
Less daily
operational responsibility - The
Franchisor is free of day-to-day unit operation and can concentrate
on the larger issues and growing the new group. This
single-minded focus on growth will help you to achieve what you
previously thought unattainable.
Cost
savings - The cost of
putting together a franchise system, with potential for massive
expansion, is often less than the amount required to open one
further company store. It really is an investment in asset creation
for a lot less than you might imagine.
Purchasing Power - Purchasing of supplies, advertising and
other services become more cost effective as a franchise group
expands, and those benefits flow through to company owned outlets
as well. Your existing business can only benefit from the plan.
An exit strategy - By creating a franchise group, with
contractual cash flow from Franchisees in place for a set term
(e.g., 10 or 20 years or more), you will have a new asset that is a
highly saleable commodity. The market place for mature
franchise systems is buoyant and values are firm.
"Franchising
is an inexpensive, sound and proven business expansion strategy,
which combines managed risk with the prospects of substantial
growth and profit. This, coupled with a soundly structured
system and market dominance in your field, should provide for
greater stability, security and Business Goodwill Value for all in
your system."
John
Brown
In summary,
there are many sound reasons why franchising may suit your
business. Why not explore it to see what the merits are for
you and your business?
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