Franchising is one of the most common business strategies that many business owners rely on, as it has proven to be adequate when it comes to getting and keeping customers. If you want a system in which you can establish an image in the minds of current and future customers, franchising is the best strategy for that purpose. In this guide, we’ll provide you with 6 reasons why franchising is a great business strategy.
1. Better Access To Capital
You may already be familiar with the fact that most businesses struggle with expansion due to their limited access to capital. Your goals may always exceed the funds you’ve pooled along with your business partner, which will force you to make sacrifices in different aspects of your business, something which will have a negative effect on your business in the long run. Franchising, on the other hand, omits this shortage of capital by allowing you access to the resources of others.
By using other people’s money, a franchisor will be able to grow their business in no time. Additionally, franchising will help your business to expand without any contingent liability, which will effectively reduce a franchisor’s risk.
2. Functional Business Model
Every business needs a functional business model in order to provide its customers with the best services and products that they want. A good business model will do so both now and in the future. The gurus at https://www.franchise.com/ explain that franchising business models are excellent for getting a high brand equity and enhanced marketing. It also offers better chances of success than a sole proprietorship, lesser time for establishing business and operating, and lower costs through the use of group purchasing.
In the franchising model, ‘follow the system’ is an important aspect of success. Although it won’t do much to support independence, chances of success and profits are significantly higher.
3. Marketing Assistance
There is no denying that no business can survive without a solid marketing strategy in place. However, between SEO, email marketing, and social media marketing, it might take quite a bit of time before you can garner the results you want. Thus, you might want to hire marketing assistance if you’re going solo. Franchising, on the other hand, doesn’t require you to do so, as you’ll already have a staff that is experienced with budgeting and placing marketing plans for your business. Franchising guarantees that you’ll get all the tools you need to do effective marketing.
4. Higher Purchasing Power
Franchising is great in the way it enables you to use the purchasing power of the entire system. This means that you can negotiate prices for anything you need, which you wouldn’t have been able to do if you were working independently. This doesn’t apply only to initial purchases, like purchasing furniture, computer equipment, and so on, but also future purchases that are associated with uniforms, supplies, inventory, and all the equipment you’ll need for your business to function properly.
5. Enhanced Supervision
One of the many tasks of a normal business owner would be to perform day-to-day managerial responsibilities, handling finances, providing sick leaves for your employees, ensuring that the workflow is not disturbed by malfunctioning equipment, and so on.
Franchising eases off the managerial weight off your shoulder by compartmentalizing it through the franchising units. This means that you will no longer be responsible for the day-to-day management responsibilities. If team leaders decide to spend money on unnecessary purchases, your returns won’t be affected, which will help you direct your franchising efforts toward the bigger picture, whereas franchisees will focus more on the expense side of the equation.
6. Increased Profits
The sum of all your franchising efforts will eventually lead to increased profitability. A franchisor may depend on their franchisees to handle lease negotiation, select sites, marketing, hiring, accounting, payroll, training, etc. This means you will have a better organization, and the result would be increased profit. Although it is hard to give solid evidence to this fact, research has shown that in the past 10 years, about a quarter of franchisors made significant profits, which contributed to their average net income (40 and 45.6 percent).
There is a lot more to franchising other than increasing profits and enhancing management. One of the business owners’ various goals is to reduce risk and have both legal and real estate assistance. Sole proprietorship surely will provide these aspects as well, but they will be costly, something which you can’t afford at the early stages of operating. Franchising should help you overstep these difficulties. With the right franchisees, you will have impeccable business management and a well-rounded business plan that will eventually help you reach your goals.
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