Franchising Your Business

Have a much better mousetrap and scared to death that the world actually is beating a way to your door? People walking through your procedure with notepads and cameras? At night wondering who will knock off your procedure first Trouble sleeping? Sure that yours is another Ray Kroc story, only if the administrative center could be got by you?

Tired of scanning this newspaper and thinking, “I’ve a better franchise concept than that company”? You Maybe, too, should consider franchising. Generally, companies franchise for just one of three reasons: time, people, or money. The principal barrier to enlargement experienced by today’s businessman is capital. And franchising allows companies to increase without the chance of debts or the expense of equity. Because the franchisee supplies the preliminary investment at the machine level, franchising allows for expansion with minimal capital.

Moreover, since it is the franchisee, and not the franchisor, who signals leases and commits to various service agreements, franchising also allows for expansion with virtually no contingent liability, greatly reducing the risk to the franchise thus. Another barrier to expansion facing many of today’s businessmen is finding and retaining good unit managers. All too often a business owner spends a few months looking for and training a fresh manager only to see that supervisor leave – or even worse, employed away with a competition.

Franchising allows the business owner to overcome many of these problems by substituting a motivated franchisee for the unit manager. Enough Interestingly, since the franchisee has both an investment in the machine and a stake in the gains, device performance will most likely improve. And since a franchisor’s income is dependent on the franchisee’s gross sales, rather than profitability, monitoring unit level expenses becomes less troublesome significantly. Finally, opening a unit does take time.

Hunt for sites. Negotiate leases. Request design and build-out. Secure financing. Train and Hire staff. Purchase equipment and inventory. The end result is that the number of units you can open in any given period of time is bound. For companies with inadequate time (or too little staff), franchising is often the fastest way to grow.

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That’s since it is the franchisee that works the majority of these tasks. The guidance is provided from the franchisor, of course, and the legwork is performed by the franchisee. Thus, franchising not only allows the franchisor financial leverage, but it allows him to leverage his resources as well. It needs to be credible. Is there experienced management?

A track-record as time passes? Is the concept proven? Has it achieved good local press or public acclaim? It needs to be unique. Is it adequately differentiated from competitors? Could it be marketable as a business opportunity? Does it have a sustainable competitive advantage? It needs to be teachable. Are the systems in place?