Gain Maximum Advantages By Franchising Your Business

1. Gain Maximum Advantages By Franchising Your Business Every entrepreneur dreams of his business turning into an empire one day. To achieve this goal there are many ways to fuel growth. Banks provide a loan, investors provide capital with a view to gaining a part of profits or you can reinvest your profits in the business and let it grow at a slow pace. If you are thinking of growth without the added burden of interest, ceding decision making power to investors, adding more capital to the business, or growing at a slow rate, you will like the idea of a franchise business. There are many advantages of a franchise business. A high rate of growth There are many reasons that a business should grow. Growth is necessary to ensure that a business maintains a virtuous cycle of business where profits go back into the business to improve it. If you do not grow the reach of your business according to the demand, you will lose major market share to the competitor that addresses the consumer demand with an increase in supply. It is difficult to open a single branch that is owned entirely by you. Such expansion of business would require your capital input and also demand your time and attention. This is not possible for small businesses that are www.frantastic.in 1

2. doing well in one location but do not have the resources to ensure the same quality in another branch. The option of growing through franchises is available to such small and big businesses. A business can open franchisee units of business at multiple locations at a time. This increases visibility and access to the market and there is a better chance of capturing a higher market share. Better Management If a business opens a corporate-owned outlet, it is usually run by a manager that works for a salary and incentives. The manager may be skilled but he will not focus as much on profitability as a franchisee would. A franchise is invested in the business for a long period of time. This association gives a better understanding of the business and results in better management of the outlet. There is a high degree of involvement in all aspects of the business and a natural focus on the problem areas with a view to deriving solutions. This helps in improving the products as well as processes. Investment Expanding presence in the market through more retail outlets needs a lot of investment. The investment would be needed for infrastructure, staffing, working capital, operations, and marketing. Opening multiple outlets in a short time would mean a lot of investment capital. On the other hand, selling a franchise would mean that the franchisee will raise the capital investment needed and pay franchise fees. The ongoing royalty would mean a steady income for you. Many such franchisee outlets would mean a significant rise in income for you without any significant capital investment. Low risk of failure A franchisee typically takes on managerial duties and being concerned about the success of a business, is committed to ensuring smooth operations. He will focus on reducing small losses that arise from careless handling, theft, and indiscriminate use. If he understands the business to its core, he will ensure customer satisfaction, thereby, gaining loyal customers. A franchisee usually tries his best to operate with a small staff www.frantastic.in 2

3. and relies more on himself. This reduces the cost of manpower. In all, a franchisee tries his best to increase profits and establish the business with a long time in view. This automatically reduces the risk of failure. It also transfers other risks such as litigation by customers to the franchisee. Expansion in difficult areas While a businessman focuses on markets that are prioritized by him, he loses a potential market in the area that he finds difficult to operate in. Allotting a franchisee in such difficult regions, allows him to test the difficult markets without actually taking any risk. In a country as vast and diverse as India, it becomes essential to consider location specific demands of the market. A local player will have an advantage in such a situation but a franchisee can provide that advantage of location-specific knowledge and reach. Valuation of the business For an entrepreneur who plans to sell off the business once it is established, valuations matter a lot. Even otherwise, valuation can be useful in attraction investors looking for lucrative businesses to park their money. Often, big businesses that are diversifying or competitors looking for growth through acquisition of the existing business offer good deals to owners of a successful business. A business with a presence in many cities has a greater market base and lower risk. A franchisor would have naturally invested in branding and marketing too. This helps in higher valuations of a business and the entrepreneur can sell it at a high value. www.frantastic.in 3

4. In order to truly take advantage of turning your business into a franchisee business, you will need to be true to the core values of the franchise business. Chose only those candidates that have it in them to work towards the success of a franchise unit. There will be many who can invest in the business, have relevant experience or show great business acumen. The right candidate will be one that has a combination of all three qualities. Such franchisees are hard to come by and one may be tempted to think that the franchisees can be groomed over time. It is a big mistake to give in and recruit such franchisees. They will not be able to operate the business successfully and increase your task in dealing with them. www.frantastic.in 4

5. A franchisee outlet that does not function to the required level will result in a loss of brand value. Remember that it takes ages to build brand value but only a few bad experiences will destroy it. Franchisors also need to be careful in choosing a location to issue a franchise. A business can never succeed in the wrong location, irrespective of the market for its products and service. Ensure that the business will be based in a suitable locality. Make a proper analysis of the market that you are planning to enter through the franchise route. If you are not confident of creating a demand for your brand in a particular location, refrain from opening a franchise outlet over there. The advantages of turning a business into a franchise model are many. Focus on your own goals and take the decision to expand while keeping these goals in mind. If you are ready to face the challenges that come up with franchising a business you will be able to prepare for it. Any business that prepares well before expanding will advantage greatly from the franchise model of business. A clever entrepreneur will plan well in advance so as not to miss a single advantage. You can begin your efforts by refining your existing business model to make it more suitable to a franchise business. In case you think that it is a challenge to adapt your business model to derive a franchise business model, talk to one of the consultants at frantastic.in, You will receive guidance on the actual scale of advantage that will be gained by you from running a franchise business. www.frantastic.in 5