On the adventurous road of building a profitable business, the question of whether franchising is right for your business or not can be a hard one to answer.
So what we’re going to do is pit the pros and cons of franchising against each other and hopefully guide your decision down the right path down on the road instead of the wrong one.
To begin with, on the right side, we’ve got the positives of franchising.
First and foremost, franchising presents an opportunity to utilise your franchisors capital to help grow your business.
Whether it’s through a franchise fee in service based industries, or through actual physical asset allocation as well as franchise fee in a product-based industry, helping somebody utilise your brand gives you the chance to utilise their capital.
Franchising is also a great way to alleviate high labour costs that we face in Australia while tapping into the entrepreneurial spirit of franchisors.
We’ve all faced the problem of penalty rates, weekend rates and after hour bonuses, but franchising can offer a great opportunity to utilise a new franchisees enthusiasm and exuberance without paying them exorbitant wages.
The final punch that franchises can throw is the chance to fuel rapid growth. More so a by-product of the previous two benefits, franchises, through additional capital and manpower, can offer an alternative method to grow your business in a quick and efficient way.
But how about the negatives, you may ask?
So, on the left path, we’ve now got the cons of franchising.
Through the many businesses we’ve coached and mentored in our time, we’ve seen numerous make the same mistake by treating their franchisees as mere employees.
Quite to the contrary, franchisees should be considered business partners. When you present somebody with an opportunity to use your name, you also give them a part of your business, and this inevitability is something that all businesses need to face when franchising.
Further to the previous point, franchising is not a simple “one-size-fits-all” process. It takes time, effort and fortitude to be able to pick the right franchisee, not just the first one.
Most of all, franchising is not always a viable option for every business.
There can be countless hours of mentoring and coaching and hypothesising on scenarios, but if your business isn’t bullet proof, if it isn’t already growing, strong and profitable, then franchising can be more of a hindrance than help.
What do you think about franchising? Has your path been a bumpy one or have you managed it in cruise control?
Image source: By Reinhard Dietrich (Own work) [CC0], via Wikimedia Commons