Category : Dealers & Distributors
Buying a franchise can be a quick way to set up your own business without starting from scratch. In a franchise business, the franchisor will provide the developed way to do business in another manner, ongoing guidance, system, and assistance in return for the periodic payment of fees and the purchase. Buying the franchise can be quite a viable alternative to begin your own business. There is a primary benefit for most of the business that enters the realm of franchising are capital, speed of growth, motivated management and risk reduction, but there are more than that.
Therefore, we have compiled up the list of some 9 benefits of franchising that will help people to get a better outcome than ever as:
The most common barrier to the expansion faced by all kid of small businesses is the lack of access to capital. Even before the credit tightening of 2008 to 2009 and the new normal that ensued, the entrepreneurs often found that their growth and the goals have outstripped their ability to fund them. The franchising is the alternative form of capital acquisition that offers various benefits.
The most primary reason that entrepreneurs turn to the franchise is that it allows them to expand without any risk of debt or the cost of the equity. Firstly, since the franchise provides all the capital that is needed to open and operate the unit, this will let the companies grow using the resources of others and will grow largely unfettered by debt.
- Motivated management
Another most stumbling block facing that many entrepreneurs require expanding is finding and retaining good unit managers. All too often, the business owner spends months looking for the training and the new manager, only to see them leave or worse yet, get hired away by their competitors for results.
But franchising allows the business owner to overcome these issues by substituting an owner for the manager. No one is more motivated than someone who is materially invested in the success of the operation. Your franchise will be the only owner who can help to save his life savings invested in the business.
- Speed of growth
This sometimes happens with each and every entrepreneur who has developed something truly innovative will surely have the same recurring nightmare, which someone else will beat them to the market with their mind of own concept. All these fears are basically based on reality. The major issue in that is opening the single unit will actually take lots of time.
Franchising not only allows the franchisor financial leverage but also allows it to leverage the human resource department as well. This will let companies compete with the larger businesses so that they can structure markets. For some entrepreneurs, the franchising may be the only and the biggest way to ensure that they capture the entire market.
- Staffing leverage
The franchise also allows the franchisors to function effectively with much more leaner companies. Since we know that franchising mainly assumes that there are many of the responsibilities otherwise; it must be shouldered by the corporate home office. The franchisor can also leverage these efforts to decrease overall staffing.
- Ease of supervision
From the managerial point of view, franchising offers other benefits as well. For one, the franchisor is not majorly responsible for the day to day management of the individual franchise units. At the micro level, this basically means that if the shift leader or the crew member calls in sick in the middle of the night, they are calling your franchise, not you, therefore, don’t let them know.
If they choose to pay a salary that is not in the line with the marketplace, you can employ their friends and relatives, or spend the money on the unimportant frivolous purchase, then it may not impact you or the financial returns. Thus, by eliminating such major responsibilities and roles, this will allow you to direct your efforts toward improving the big picture in the frame.
- Increased profitability
The staffing leverage and ease of supervision will help the organization to run in a highly profitable manner. Since, the franchisor can depend on their franchisees to undertake site selection, lease negotiation, local marketing, hiring, training, accounting, payroll, and other major human resource functions.
The franchisor’s business is typically much leaner and often leverages off the organization which is already in the place to support company operations. Therefore, the net result of this entire process is that the franchise organization can be much more profitable than ever.
- Improved valuations
To account for the fact which franchisors are often valuing at the higher multiple than other organizations are the major combination of faster growth, increased profitability, and increased organizational leverage will help. Therefore, when it comes to selling out your business, the fact that you are quite successful in the market could certainly be an added advantage.
- Penetration of secondary markets
The ability of franchise will improve the unit level financial performance with some weighty implications. The typical franchise will not only be able to generate higher revenues and the outcome than the manager in a similar location, but this will also keep the closest eye on expenses as well.
Moreover, the franchisor can often operate the unit more profitable even after accounting for the royalist that they must pay the person. This will also give you the flexibility to consider the markets in which corporate returns may sometime need some marginal value.
- Reduced risk
By its nature, the franchising also helps to decrease the risk for the franchisor. Until and unless, you select to structure it in a different manner, the franchise has all the major roles and responsibility for the investment in the franchise operation, paying for any built out, purchasing inventory, etc.
The major combination of all these factors provides you with a substantially reduced risk. The franchisor can grow to hundreds or even thousands of units with the limited investment without ever spending out any of their own capital or their own unit expansion.