When You are Interested to Enter the World of Franchising
The primary benefits for various companies which join franchising would include motivated management, capital, speed of growth and risk reduction but there are several other benefits too. The lack of access to capital is one common barrier to expansion being faced by the small businesses today. Prior to credit tightening of 2008-2009 and also the new normal which ensued, entrepreneurs usually found that the growth goals outstripped such ability to fund them.
Franchising an option of capital acquisition and this would provide other advantages. The main reason why many entrepreneurs go for franchising is the fact that this would allow them to expand without the risk of cost of equity or debt. The franchisee would provide all the capital needed to open and also operate a unit, this would allow the company to grow with the use of resources and others. By using the money of other people, the franchisor may grow hugely unfettered by debt.
Due to the fact that the franchisee is the one to sign the lease and commit to many contracts, franchising would allow expansion without contingent liability. Such would reduce the risk to the franchisor. This means that as the franchisor, you don’t just require less capital in which to expand but the risk is actually limited to the capital which you invest in developing the franchise company. This is one amount that is usually less than the cost of opening a different company-owned location.
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Also, you can benefit from motivated management that is another advantage. You have to know also a stumbling block that face so many entrepreneurs who want to expand is finding and keeping good unit managers. Usually, the business owner would spend several months looking and training a new manager and only see them leave after or get hired by a competitor. Hired managers are just workers who may or probably not have that real commitment to their tasks or jobs that makes supervising the work from a distance a challenge.
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However, franchising would allow the business owner to overcome such issues through substituting the owner for the manager. There is no person who is actually more motivated than one who is invested in the operation’s success. The franchisee is going to be the owner and usually his life’s savings is being invested in the business. The compensation would come through profits. The combination of these factors will have different great effects on the unit level performance.
With franchising, the franchisor can function effectively with a leaner organization. Because franchisees will assume various responsibilities that are otherwise shouldered by the corporate home office, then the franchisors may leverage such efforts to minimize overall staffing.