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6 Reasons You Should Franchise Your Business Immediately

Strategic Franchise Development • Jul 07, 2020

In the United States, franchised business supports over 7.5 million jobs and makes up over 700,000 establishments. 

Franchising is a wonderful way to expand your business and while modern efforts actually started in the United States, it is now a worldwide endeavor.

The truth is that franchising your business is much more of an investment than a cost. It may seem like the costs behind growing your business are too much to risk but, if you do it right, you'll make more money in the long run.

If you want to learn why you should franchise your business, keep reading to learn more about 6 reasons it could be the best choice for you.

1. Faster Business Growth

It can be a scary thought to know that you have something awesome in development, but someone else may be conceptualizing the exact same thing. Opening a new business takes a lot of time and this is part of the issue.

For some people, franchising is one of the best ways to make sure that they are able to take advantage of the market before the "next best thing" comes along. You'll be able to beat the competitors at their own game by creating even more leverage for your business!

Franchising gives you financial advantages, but it will help you with human resources as well. You'll be able to compete with the bigger businesses, especially if you're starting to saturate the local market. 

2. Higher Profits

You'll be able to run in a profitable way because you will have more staff and supervision at your fingertips. As a result, you can actually depend on any franchises you have to have franchisees that will focus on the details like location, hiring, training, and lease negotiation.

Because the franchisor is taking over those duties and they are leveraging on the organization you've already created, that support results in more overall profits for everyone involved.

3. Stronger Valuations

If you're considering the quick business growth, organizational supports, and higher profitability, it's easy to see why franchisors may be valued at a higher level than other types of businesses. 

This means that if you want to sell your business, you will probably be at a huge advantage and can demonstrate the growth to any potential buyer. 

4. Retaining Good Managers

If you want to expand and aren't considering franchising, you'll find that finding and keeping good managers for locations is not always easy. You may spend a long time looking for and training a manager only for them to leave or get hired somewhere else shortly after.

Managers that you hire this way also only have the privilege of being an employee, which means they may not even be that committed to their work anyway.

If you decide to franchise, you'll let the actual owner of the location be the manager. This means that these problems no longer exist. They will want the location to succeed because they are the owner and this will give them the motivation needed to strive for success without your constant supervision.

Some benefits of using owner/operators include:

  • Better operations
  • Longer commitment to the company
  • Higher-quality management and skill
  • More innovation

Overall, your managers will care more because their reputation is also on the line and this means better business.

5. Less Overall Risk

Unless you decide to structure your franchise differently than the norm, your franchisee will have practically all of the responsibility.

They are in charge of the operations, human resources, accounting, and more for their store. They are also responsible for working capital that allows their location to thrive. 

This means that the franchisee is in charge of whatever happens within the franchise itself, so you are not under liability for any potential issues that the location experiences (such as age discrimination, accidents, or EEOC issues).

If you consult advisors first or even ask your attorney, you'll likely hear that you should create a legal entity as your franchisor instead of exposing yourself. This usually costs less than opening a new location, so the cost is smaller than you may think.

Due to all of these factors, your risk after you decide to start franchising is small and help you grow to hundreds or thousands of stores without even having to invest that much more money. 

6. Reserves and Resources

A big problem when it comes to businesses that want to expand is the lack of starting resources. Specifically, capital is needed for growth.

Franchising is a great way to grow your business without having to risk debt or the cost of equity.

You can expand without having to use your own money since the franchisee is the one responsible for these costs. Another thing to consider is that you don't actually commit to the contracts needed for the new location - the franchisee does that, too. 

Your financial commitment to the new location is much smaller than it was when you started the original location and as a result, even those with small capital to work with can franchise if they do it correctly. 

Consider These Reasons on Why You Should Franchise Your Business

Now that you know a little bit more about why you should franchise your business, you may be ready to get started.

Our services can help you figure out whether or not your business is franchisable and if so, what the next steps are.

We want to help you grow your business and let it become what it is meant to be. Contact us to learn more about what we can do for you today! 

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