Should You Consider Franchising Your Business
Should you consider franchising your business?
A well executed franchise program can catapult a sound business concept into a world-wide organization. Growth can be accomplished by utilizing the capital and motivated management provided by franchisees.
But franchising can be a double-edge sword. Mistakes can turn a successful business into a disaster. Here are strategies that come from hands-on experience, starting with the advantages:
• The need for capital to grow is largely eliminated. The franchisee fees paid by franchisees can cover your opening expenses such as fixtures, signs, rent deposits and other opening expenses.
• You will avoid employee related problems since neither the franchise operators nor their employees will be on your payroll. You will be relieved of escalating headaches such as health care, workers compensation insurance and other labor related issues.
• The franchisor is free to more rapidly expand geographically. Using IT and communication tools, international expansion becomes more feasible.
Some of the disadvantages of franchising include:
• Your concept will need to possess sufficient volume plus earnings, pricing and lasting power for both you and your franchisee to earn profits over a long period of time.
• You will no longer have absolute control of how your stores are operated. You will be dealing instead with franchisee-partners.
• If a franchisee is unable to make money or becomes disgruntled, you can be in for a lawsuit. If even as few as 5% of your franchisees instigate litigation, your future could be in jeopardy.
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