Benefits to Enter the World of Franchising
The main advantages for several companies that enter the realm of franchising include the speed of growth, capital, motivated management and also risk reduction but there are many other things too. A really common barrier to expansion which is faced by small businesses today is the lack of access to capital. Prior to the credit-tightening of 2008 to 2009 and also the new normal which ensued, the entrepreneurs usually found that the different growth goals outstripped the ability to fund them.
Actually, franchising is another form of capital acquisition and such provides some benefits. The main reason why a lot of entrepreneurs would opt for franchising is the fact that this would allow them to expand without such risk of debt or cost equity. 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 money of other individuals, the franchisor can grow unfettered by debt.
Moreover, since the franchisee is the one to sign the lease and also commit to various contracts, franchising would permit expansion with no contingent liability. This is going to reduce the risk to the franchisor. This means that as the franchisor, you don't just require less capital in which to expand but the risk is actually limited to the capital which 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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Also, you can benefit from motivated management that is another advantage. You should know that another stumbling blocks which face a lot of entrepreneurs who like to expand is looking and retaining good unit managers. Often, the business owner would spend months searching and training a new manager and just see them leave after or be 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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But, franchising would permit the business owner to overcome the issues by substituting the owner for a manager. There is no person who is actually more motivated than one who is invested in the operation's success. The franchisee is the owner and one's life's savings is being invested in the business. The compensation is going to come largely by profits. A combination of such factors will have various positive effects on the unit level performance.
Through franchising, the franchisor can function in an effective way with a leaner organization. Because franchisees will assume various responsibilities that are otherwise shouldered by the corporate home office, then the franchisors may leverage such efforts to minimize overall staffing.