To Franchise or not to Franchise?

For small businesses growing beyond one outlet can be difficult and expensive. The more you grow the more capital you need. Franchising your business can be a good way of expanding yet keeping costs minimal.

So how does franchising work? Well, to start with, your business needs to be successful. Nobody will want to franchise a business from you if it doesn’t make money. A franchised business needs to generate enough profit to make money for both the franchisee and you.

Each franchisee finances their own outlet themselves. While the franchisee meets all the costs and collects the income, you receive franchise fees from the franchisee or a mark-up on your products sold by your franchisee.

The franchisees also run their businesses themselves, reducing the management demands placed on you. The best franchisees will be highly motivated and have local expertise, making your life much easier.

Rather than managing their business, your role involves supporting your franchisees. This could include helping the franchisee find and fit out premises, training the franchisees in the business processes and creating operating systems that help new franchisees to successfully set up and run their franchise.

You would also be responsible for providing marketing materials and resources, such as a branded website. In addition to this you would need to run advertising campaigns to build brand awareness.

While this can offer entrepreneurs a relatively easy way to get a foot on the ladder of owning their own business we have to consider what it does for originality and competitiveness in business.

We would love to hear from anyone who has had personal experience of this, either as the franchiser or franchisee.

For small businesses growing beyond one outlet can be difficult and expensive. The more you grow the more capital you need. Franchising your business can be a good way of expanding yet keeping costs minimal. So how does franchising work? Well, to start with, your business needs to be successful.

Nobody will want to franchise a business from you if it doesn’t make money. A franchised business needs to generate enough profit to make money for both the franchisee and you.Each franchisee finances their own outlet themselves. While the franchisee meets all the costs and collects the income, you receive franchise fees from the franchisee or a mark-up on your products sold by your franchisee.

The franchisees also run their businesses themselves, reducing the management demands placed on you. The best franchisees will be highly motivated and have local expertise, making your life much easier. Rather than managing their business, your role involves supporting your franchisees.

This could include helping the franchisee find and fit out premises, training the franchisees in the business processes and creating operating systems that help new franchisees to successfully set up and run their franchise.

You would also be responsible for providing marketing materials and resources, such as a branded website. In addition to this you would need to run advertising campaigns to build brand awareness.

While this can offer entrepreneurs a relatively easy way to get a foot on the ladder of owning their own business we have to consider what it does for originality and competitiveness in business. We would love to hear from anyone who has had personal experience of this, either as the franchiser or franchisee.