Franchising Your Business Model - Turbo Charge Your Growth
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Franchising can allow your business to grow at rapid pace, and gain a presence in new markets. Although there are disadvantages to going down the franchise route, and although it will not suit all business models, franchising is often an under-used tool among business owners that are looking to scale their operation. Following are six reasons why you should consider franchising your business.
Turbo Charge Your Business Growth
One of the greatest benefits to franchising is getting things done fast, and with less labour costs. You'll be able to focus on recruiting franchisees, and then they will focus on growing your business model in their region. You can even sell master franchises for an entire country or continent, and allow the franchisee to take full control of that market place.
Reduce Gearing As You Grow
You will increase your capital base from franchising fees as your business grows. A business will traditionally borrow money, and increase their gearing as they grow into new markets. With a franchising model, you'll be able to see your sales grow, your market reach grow, and you'll also be able to see your balance sheet strengthening at the same time.
Prevent Equity Dilution
When you grow your business it can be tempting to give away equity to fuel growth. Although in many ways this can work out well, it does mean that in the end you're left with a smaller share of the pie. When you grow your business through franchising, you'll be able to grow with low levels of debt and without diluting your equity position either.
Galvanize Your Business against Cannibalisation
When you receive money from each franchise that is sold, and you also make money in management fees (usually calculated as a percentage of revenue) cannibalisation ceases to be a problem for the franchiser - unless this is something that worries franchisees. The reason: as you take on more franchisees, you make more money from licensing; and although more franchisees may damage a franchisee's profitability due to the size of each territory being reduced, it will not damage total revenue, and therefore you will continue to prosper, even during a recession when your franchisees are struggling.
Limit Losses
During a bad year, it's possible to make less money, but it's not possible to lose money through franchisees losing money. That risk is assumed by them. You will charge management fees as a percentage of revenue, and as revenue cannot be a negative number, you will always earn an amount in management fees from this. In the long term the profitability of franchisees is of paramount importance, but it's good to know that you will be stronger than your competitors during more difficult trading periods.
Work With a Network of Entrepreneurs
Entrepreneurs are naturally more dedicated & motivated than employees; they have a profit incentive. They tend to be more outgoing and gregarious. You will be able to benefit from this energy through having each and every territory managed by a business person with a strong incentive for their franchise to do well.