Expanding your business by opening new branches yourself is a costly exercise as each new location will involve marketing costs, new building leases, salaries for new employees and investment in capital equipment. In contrast, franchising a successful business can prove to be a much less expensive route to major expansion. Because each franchisee must pay a fee to start their business and must cover all the start-up costs mentioned above, your company will be able to expand more quickly, without using all its capital reserves. Each franchise then pays you a percentage of their monthly income, guaranteeing your company a profit if the initial business model is sound. You can find out more about the costs of this by looking for franchise info.
As each franchisee is responsible for the day-to-day operations of their business and must manage it in accordance with the terms and conditions laid out in the agreement they sign, there is no need for you to micromanage each new franchise. Franchisees will have invested their own money in the business and will share the same goals as you, i.e. maximising profits. Your management system will therefore be much simpler than would otherwise be the case.
Franchise networks allow for much faster expansion because each new franchise is self-financing. This is in contrast to organic business expansions, which are naturally slower as you will be working with a limited amount of capital and must therefore wait to make a return on each new branch before opening another.
Better Market Penetration
Franchisees are normally already familiar with the area in which they plan to operate and have many local contacts, providing better and faster market penetration than could be achieved by your business expanding into new and unfamiliar territories on its own.
Because each franchisee will have invested his or her money in the business they run, they will be highly motivated to make a success of it. Even the best managers cannot hope to match this level of commitment as it will not be their money or the success of their personal business that is at stake.
If your company were to open new branches on its own, each one would necessitate the recruitment of additional staff and branch managers. When franchising your business, on the other hand, the responsibility for recruitment lies with each franchisee and even in the event they wish to sell up, it will be up to them to find a suitably qualified buyer who, in turn, will be responsible for all recruitment functions at the franchise.
Master franchising a UK business across international borders will enable your company to expand globally in a very efficient manner. Each master franchisee is responsible for the management of individual franchises in their country, which means they can use their local knowledge and expertise to ensure that the initial business model is a success in their part of the world. There is no need for you to create subsidiary companies overseas or to deal with all the complications that arise from such an undertaking.
Also published on Medium.
Love the infographic, great information. Thanks for sharing!