Thursday, 11 April 2013

The Advantages of Expanding Your Business Through Franchising

In recent years, the growth rate of franchising has been exponential. The proven success of franchising has prompted many businesses to regard it as a quick strategy to expanding their business. This article weighs the pros of using it to your business advantage and explains why it is so appealing to many companies.

The success of franchising is well recognized in businesses such as fast food, casual restaurants and educational enterprises. However, in recent years, more and more businesses from other industries are also jumping on the bandwagon. From Sydney self storage to signage businesses, many are discovering the advantages of growing their business through this method of expansion.

So why is franchising so appealing? To the franchisor (the owner of the principal business), it offers many benefits that cannot be easily overlooked. Here are just a few of the many advantages.
1. Boosting market share and developing a strong brand equity
Franchising is probably one of the quickest ways to enlarge market share and build a strong brand equity. Consider the amount of investment a business requires if it wanted to increase market share through opening of more outlets. Needless to say, it would be quite substantial. However, by franchising your business to other business owners, not only are you able to open up new markets quickly, you can do so without having to invest money in the outlets yourself.
2. Reaching your targeted consumers
You can also reach your target market more effectively through cooperative advertising and promotion. While your marketing department can come up with fabulous national campaign to build your brand nationwide, there is only so much you can do for local advertising and promotion. With franchising, your franchisees would be willing to chip in and do their part in order to improve their business locally too.
3. Economies of scale through bulk purchasing
Rapid expansion through franchising also means that you are able to reach operating efficiencies and economies of scale quickly. With that, you can engage in more meaningful negotiations with your major suppliers for better deals. This benefits everyone, including your franchisees, allowing them to build their business on more cost effective grounds.
4. Recruitment of motivated owners and operators
One of the most difficult tasks in business operation, particularly in retail, is getting motivated and efficient staff to run the business. Unlike employees, franchisees are highly motivated in making the business a success since they are driven by their own profit margins. By replacing internal personnel with these motivated owners and operators, the probability of success is generally higher.
5. Transfer of risk
Risk exists in every business or investment. With franchising, however, some of the risk is transferred to the franchisee, who themselves would invest their own money into the business. For example, if you franchise a self storage business, your franchisees would rent their own warehouse, purchase their own warehousing and security equipment, and hire their own staff. Instead of incurring these expenditures, they are now transferred to your partners. Of course, you have to share the profit too, but that’s what it is all about.
Considering the many benefits of franchising, it is no wonder why so many companies are employing it as their business expansion strategy. Have you weighed the costs and benefits of your business too?