Franchising is a broad-based definition used to describe an independent distribution channel. It is a market that has become an industry by which business models are replicated through entrepreneurial relationships which share proven business models to energetic and enthusiastic entrepreneurs looking for an opportunity. Franchising a business allows a business owner to acheive the following benefits:
1. Growth with less capital. When you franchise your business, the franchisee makes an investment in the business. They will build a location if required, fund the local marketing program and spend the capital needed to get the business off the ground in their market.
2. Infusion of energy and entrepreneurial mindsets into a growing business. Many of the best ideas in franchised businesses came from the franchisees who had bought into the system. Whether it was new technology, marketing, logistics management or the egg mcmuffin, franchisees have helped franchisors build more efficient and profitable businesses for years.
3. Benefit of gaining local "feet on the street". Franchising works effectively because the franchisee, if chosen correctly, will be someone who has influence, experience and a network already established in the market they are opening their business within. An ideal franchisee brings an established network from which to build a customer base and an understanding for how the local market works in order to get the franchised business off the ground in as short of a time period as possible.
4. Speed of Growth - Franchising typically allows for a business to open 3-10 new units per year on average during the initial phases of growth. In later years, as a franchise system matures, larger networks can open and add as many as 300 or more units in a single year through franchise distribution systems. Franchising allows for fast growth over long distances in far away markets.
5. Operational Efficiency - Why is it so difficult to manage employees in locations that are farther away from home base? It's simple, when there is no one with an ownership stake in the business operating the location, the business will never operate as efficiently. Franchised units have consistently outperformed company-owned units in many franchise systems including Dunkin Donuts, McDonald's and others. Franchisees have put their own capital into the business and want to see as much profit as possible come back to them for their investment.
Not all businesses can or should enter the world of franchising. For an initial consultation and discussion regarding whether your business is ready for franchised distribution, contact us:
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FMS is a team of expert franchise consulting professionals based in Canada that provides solutions for franchise development, franchise consultation, and expansion of businesses globally.