Assets of Moving Towards the Realm of Franchising
Capital, speed growth, motivated management and risk reduction are the major and primary advantages for almost every company who enter in the realm of franchising– despite these, there are many others as well, let’s have a glance on the other advantages:
- Capital- Due to lack of access to capital, today’s small businesses face the most common barrier to expansion. Franchise, as an alternative accession, which offers some perks. There is a primary reason why most of the entrepreneurs switch to franchising, it allows them to expand without the risk of debt or the cost of equity. Since, the franchisee provides all the capital required to open and function a unit, it allows companies to grow using the resources of others. Moreover, the franchise not the franchisor signs the tenure and commits to many contracts, franchising permits for expansion with virtually no possible liability, and nicely reducing the risk to the franchisor.
- Motivated Management- Another hitch facing many entrepreneurs desiring to expand is finding and retaining good unit managers. A business owner takes months to look for and train a new manager, just to see them leave or, worse yet get hired away by the competitor. Hired managers are the employees only who may or may not have the legal and genuine commitment to their jobs, at their workplace, which makes a challenge for them to direct their work from distance.
Franchising yet allows the business owner to tackle these problems and overcome from them by replacing an owner for the manager.
Here is some positive impact on the unit level performance of the amalgamation of these factors:
- Long-term commitment
- Better-quality management
- Improved operational quality
- Innovation
- Franchisees typically out-manage managers
- Franchisees typically outperform managers
3) Speed of Growth- Opening a single unit of franchise takes time. It may be the only way for some entrepreneurs to ensure that they can clutch the market leadership position before any competitor intrudes on their space because of the franchise act on most of these tasks. This not only allows in franchisor financial advantage but also allows it to advantage human resources as well. Franchising permit companies to compete with big businesses so that to spread markets before these company can respond.
4) Staffing Leverage- Franchisors function efficiently by the permission of franchising, with the much leaner organization. Liabilities or responsibilities shouldered by the corporate home office to the franchisees, franchisors thus, can leverage these efforts to deduct overall staffing.
5) Ease of Supervision- Franchising provides other leverages as well. The franchisor will not be responsible for the day-to-day management of the individual franchise units. By eliminating or deducted some responsibilities, franchising allows you to direct your efforts towards improving the big picture.
6) Increased Profitability- Franchisors can depend on their franchisees to undertake site selection, tenure negotiation, local marketing, hiring & training, accounting, payroll, and other human resources functions and the franchisor’s organization is typically much scanty. Hence, it all conclude that the franchise organization can be more profitable.
7) Improved Appraisement- The amalgamation of faster growth, increased profitability and organizational leverage helps to reach the fact that the franchisors are often estimated at a higher multiple than other businesses. So when time lands on time to sell the business, the fact that you’re a successful and hikable franchisor that you have established an elevating growth model could certainly be a boon.
8) Reduced Risk- By its very naive, franchising also reduces the risk for the franchisor. All the responsibilities for the investment in the franchise operation, paying for any build-out, purchasing any inventory, hiring employees, and taking over the responsibility for any working capital needed to stand up a business, has owned by the franchisee.
The franchisee also has the liability for what happens within the unit itself so you’re away from under any liability for employee prosecution.
The incorporation of these factors provide you with considerably reduces risk. With limited interest and without spending any of their own capital on unit expansion, Franchisors can develop to hundreds and more units.