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Franchising Your Small Business is a Growth Opportunity That is Often Overlooked
Have you ever considered franchising your Small Business?
Franchising is a business relationship in which the franchisor (the owner of the business providing the product or service) assigns to an independent individual (the franchisee) the right to market and distribute his or her goods or services and to use the business name for some time.
The franchisor, via contract, provides a licensed privilege to do business, plus assists in organising training, merchandising and management in return for a fee from the franchise.
Franchising can be used to describe various business models, the most common being business format franchising, which is a comprehensive system that lays out the conduct of things like business planning, management, location, quality of goods, and appearance or image.
Today, business format franchising is the fastest-growing franchising segment. The interesting thing is that it has now spread across every sector in Australia.
Some perks of franchising.
Franchising your business is an exciting option as it allows for business expansion without assuming more debt with the franchisee paying you for the privilege to use your brand and underlying business processes.
Franchising can be attractive to small business owners for a few reasons, such as:
- Adding franchises results in rapid growth.
- No need to assume the daily operation of each outlet.
- The franchisee is financially motivated to succeed.
- Earn profits without a high capital risk.
- Less staff to manage.
- Business expansion to new regions.
In the first five years, Australian small businesses have an 80% chance of failure. This is why the franchise model isn’t a one size fits all solution, meaning that not all businesses will benefit from franchising.
A business needs to prove its viability, market demand, and its command of marketing, training, management, and logistics. Then, it needs to show replicable processes that helps support new franchisees. This is important in determining if a particular franchisee is the right fit.
Important things to consider.
If you’re a small business owner considering the move from small business owner to a franchise model, it is first important to ask yourself some questions first:
Can I “sell” the model?
To be franchisable, the business model needs to be attractive. Consider your brand: Is it unique and credible? Is there client buzz around it?
Can I replicate my business?
The real secret to a successful franchise is a replicable model. If your business concept only stands up because your business location is unique, or you have a superstar salesperson, or you dedicate 80+ hours/week to make it work, franchising might not be the right option.
Franchise concepts should be simple to operate and offer easy entry into a variety of markets.
Can I provide value?
The most successful franchises work because the franchisor is committed to helping the franchisee succeed. It means creating training programs and sharing insider tips and tricks to help each location not only maintain the same “vibe” but to assist the franchisee in recreating the magic of the original business.
Franchising isn’t a scenario to set and forget about because you’ll need to dedicate time and build strong relationships.
Do I have the capital?
While franchising may be a low-cost means of expansion, it is in no way a no-cost endeavour. You as a franchisor will have to have at least some capital to develop training manuals, marketing materials, and more. You’ll also want to hire professional legal experts to ensure your business stays compliant with franchise laws.
Even though the choice to go from a small business to a franchise model could be quite challenging, just remember that they’re plenty of rewards to reap if it has been executed successfully.
If you are considering to change your business model, remember that it is vital to outweigh the pros and cons and of everything that a franchise has to offer, while also factor in that the majority of franchises fail.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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