Entrepreneurs are generally known for their ingenuity, creativity, and their ability to assess and take risks in the pursuit of good business opportunities. In other words, the entrepreneur is the independent, modern-day homesteader, looking to create their own opportunities. So why would they be interested in a franchise, which stereotypically limits their ability to take risks and take full ownership? What are the best franchising advantages?
Franchises do have to adhere to certain franchisor requirements—including using the franchise name and branding, specific products or services, and adhere to corporate policies. And while it’s true that the best franchisees are the ones who know how to follow a plan, the benefits of owning a franchise might actually allow for more independence than you might think. Here, we’ll take a look at the main franchise advantages for all parties.
What are the main benefits of franchising for franchisees?
For entrepreneurs who research and analyze how franchises work under their franchisors, they can determine potential investment opportunities that still allow owner-independence.
1.) Low start-up costs
The reason many entrepreneurs end up exploring the potential of owning a franchise comes down to the start-up costs of a new business. Covering the costs on your own—and with an acknowledged delay before developing consistent revenue—new businesses often fail before they can support themselves. Franchises can generally bring in revenue fairly quickly due to low startup costs and immediate corporate branding support.
2.) Corporate Support
Many franchises will bring new franchisees to their corporate offices for days at a time for training. They will train both in the practical aspects of the business as well as some management training. This corporate support varies from franchise to franchise, but some franchises excel at this—even offering training programs and even certifications for franchise employees.
This kind of support is expensive and rare for entrepreneurs forming their own small business. But the benefit of the franchise model is you’re developing your workforce in a way that will increase retention and customer service and quality.
3.) Brand Awareness
When you purchase a franchise—especially a business unit from a successful, national franchise—the business comes with brand awareness. Customers are already familiar with your service or product. Your responsibility is to develop the existing brand with local customers to build your business in particular.
The downside? When you are associated with other franchises, their reputation is carried over to your business unit. This is the challenge for franchisees: to piggyback off any positive associations with the franchise brand while distancing your specific unit from any negative brand associations that might exist.
Benefits of Franchising for Franchisors
Those three main benefits for franchisees make the investment well worth the up-front cost of owning a franchise. But why does this model work for franchisors?
4.) Lean growth opportunity
When you have franchisees responsible for developing and sustaining their own business, you create motivation that results in lean growth, one of the best benefits of franchising for franchisors. Rather than fueling your growth with expensive investment, the franchisees will create this momentum on their own because that’s how they’ll grow their individual businesses.
5.) Diverse Geographical Revenue Sources
When you are able to have multiple unique, competing business units in multiple geographic locations, you have varied streams of revenue which allows you to be flexible. When some business units or areas aren’t performing, you can generally make up for that in other areas. If your product and service is good, you’ll be able to carry the weight temporarily for low-performing business units.
6.) A Low Risk Model
With franchisee’s taking ownership of the majority of the risk with their individual franchise—and with multiple franchises spread across an area—the risk is mitigated for the franchisor. In the event a franchise fails, the overall cost to the franchisor can be absorbed by its investments in other areas or franchises.
What is franchising and what are its benefits for the distribution of services?
7.) Franchising as a Distribution Model
Depending on the type of franchise you run, your extended franchise network will only benefit the distribution of services of your business. Franchisees will seek out new markets with the potential for growth. And they’ll generate independent demand. This benefits both the franchisee and the franchisor.
Interested in learning more about franchising and how this business model works for growing companies today? Franchise.com has created a franchise database that provides start-up costs for owning a new franchise, relevant details about what is required from franchisees, and other important information for anyone considering an opportunity with franchising. This is a great tool to learn more about franchising and compare from business to business.
