Advantages and disadvantages of franchising your business
Franchising offers many advantages as a method of expanding your business, but you must also consider the disadvantages of this business model.
Advantages of franchising your business
- A franchise network requires far less staff than a similar sized network of corporately owned outlets.
- Franchising benefits from the investment of others (the franchisees) to help grow the business - making expansion much more cost effective.
- A fee will be paid by the franchisee both at the start and ongoing.
- Once the right systems are in place, a business can expand at an impressive rate – limited only by the ability to recruit, train and support franchisees.
- The business is likely to become much more robust as it is underpinned by determined franchisees.
- A franchise network can start to benefit from bulk buying and other cost and operational efficiencies.
Disadvantages of franchising your business
- The business is reliant on the right systems being put in place to protect the brand, the franchisor and the rest of the network.
- There is still a significant investment to make in ensuring the right advice is taken, documentation produced and systems put in place, before you start.
- The franchisee pays you an ongoing management fee, but they take the rest of the revenue earned from their efforts.
- Franchising a bad business will just provide a bigger bad business.
- You cannot franchise an idea – you have to have operated and proven the system first.
Find out about the key steps to take in franchising your business.