The benefits of franchising a business
The benefits of franchising a business successfully are quite significant. Positive cash flow, an entrepreneurial environment, and lower operating expenses. However, before eulogising too much about this let’s consider a couple of key downsides.
There are no guarantees when franchising a business
No-one can guarantee that you or your franchisees will be successful. Franchisors and franchisees are all in the same boat as self employed people or businesses. The risks of self employment are well known and you must accept that franchising might not work. On the face of it though you’ve got a far better chance of success. So too have your franchisees. Everyone is replicating what’s already working. If your business isn’t already working then don’t proceed any further!
Franchising is more emotive
The benefits of franchising a business essentially give you a business within a business. The actual process of franchising a business is usually more profitable than the core business itself! It’s an exciting journey. However, like any other business venture, it will give you and your franchisees an emotional roller coaster at times. Nothing stirs more emotion than a business that is losing money. You might be blamed by your franchisees despite all you do to help them. When and if a franchise fails or goes bust you can be sure that it becomes a very emotive issue for all concerned. It’s not purely a business to business issue. It’s an emotionally charged issue person to person.
Why franchising works
If your business can be operated in a different location, and it is profitable already then you can look at franchising it. In our opinion, the benefits of franchising a business far outweigh the issues of growing using your own staff. Incoming franchisees provide positive cash flow that can help you to invest heavily in the brand. You won’t need the same layers of staff because franchise owners are their own boss. They deal directly with the client so your role is training, support and mentoring. Above all else, once you franchise a business you’re all in, fully committed. So, best to make sure you do it right the first time around.
The benefits of franchising a business with Lime Licensing Group.
We’ll advise you without charge. Spending the time to help you to consider franchising is part of what we do. It’s a mutual exploration. As a result, you can be sure that if we think it’s doable that it is a realistic option for you. Our regional team around the UK is at your disposal. At the heart of every franchise transaction is two sets of fees. Firstly, an initial fee to get the franchisee setup. Secondly, an ongoing fee, often linked to turnover as the franchisee generates money. So in addition to the other benefits of franchising a business the financial deal is lucrative for the franchisee provided that the franchisees are successful of course. A franchisor often makes a margin on the initial franchise fee and the royalty leading to a cash flow positive scenario.
Franchisees bring expertise you might not have already
That expertise comes free to you. Mcdonalds have a big marketing department. Probably one that costs several million dollars each year. But who dreamt up the Big Mac? Well it was a franchisee not the highly educated marketing experts at McDonald’s. When you franchise a business you get incoming expertise as a by-product. Sure, you’ll get some crazy suggestions too, but all savvy franchisors listen to their franchisees. As you bring in more and more franchisees you get more and more expertise along with them. As a result, your business and that of every franchise owner can benefit.
Your customers become your franchisees when franchising a business
Your customers are replaced by your franchisees. Those franchisees sit between you and your customers which means you deal with fewer people than you would if you dealt directly. For example, if you used to be a widget supplier supplying directly to 1000 customers you might only need 10 franchisees to look after those 1000. So now you’re dealing with 10. Those 10 deal with the original 1000. As result franchise companies are often lean, small head office teams. Furthermore, your franchisees (now customers) are tied to you on long contracts. It’s not unusual to have 5 – 10-year agreements with your franchisees. This means when. or if, you choose to sell up yourself that an incoming buyer has more certainty which can mean a higher exit.
Scale, scale and scale
So good we said it three times. Scale is one of the biggest benefits of franchising a business. Usually, but not always by franchising your business you can scale the whole company up quicker. Financially it’s cheaper and time-wise it’s quicker. The only bottleneck is usually your ability to train the franchisees. However, that is easier than you think because you can train several at a time can’t you? This means you can scale up the business quickly. We find that most of our clients have enough spare human capacity at the outset to train the first franchise partners. Our role at Lime is to soak up all the recruitment time which is something we do for every client. Once you’ve got your network going you can then bring in executives to assist in their day to day management.
For a franchisee, acquiring a franchise is proven to more successful than going it alone. If you think about it they are getting a fast track route avoiding all the mistakes to a successful business. Just be sure that when you take new franchisees on that they have the right personal qualities and can afford it! If you are chose who you tale on then franchising is a viable and profitable route for you to follow.
We’ll do a free assessment for you, give us a call on 01274 662001 for more information or fill in our contact form.