What is franchising?
Franchising can offer you a smart and cost-effective expansion strategy. Businesses looking to expand nationally and even internationally would do well to consider franchising as an option. A well-established growth strategy, franchising lets others pay you for the privilege of opening and operating new locations of your business. For less than the price of a single new office or retail location, qualified companies can franchise their operations and build the beginnings of a nationwide network.
How does franchising work?
Franchising works by allowing third parties to open clones of your business. As a “franchised” business, you license your brand and business methods to selected “franchisees” and provide them with the training, manuals, and launch package to help get them started. Your franchisees then establish their business and grow it under your tutelage, according to your specifications. In return, you receive an initial fee, as well as ongoing management service fees, which are generally a percentage of your franchisees’ turnover.
Franchising can be a win-win proposition for both parties. Franchisees enjoy the opportunity to own and operate a proven business and enjoy training, support and other benefits that are often not available to entrepreneurs. Franchisers slash the costs of growth, significantly reduce their risks, and accelerate their expansion, giving them that all-important competitive advantage.
Who is franchising suitable for?
Franchising is not for every business. To undertake a franchise development programme, a business must be shown to work in practice, be profitable and have an offering with a good medium to long-term prospects and national, if not international, appeal. Franchising is not a fix for businesses in trouble. It is a long-term growth strategy that involves an important initial investment and a ramp-up period.
About the author
This article was written by Franchise Development Services (FDS), an industry-leading, full-service franchise consultancy who provide franchising support and advice to Forum members.
Last updated 7th June 2016