Franchising your business can be one of the most rewarding and successful expansion options, Sukhdeep Dehal, franchise development manager at Lloyds, says
All successful businesses will at some point face the prospect of growth and expansion.
Expanding a business unlocks both potential opportunities and threats for the owner, which will need to be carefully evaluated before a strategic decision can be reached. It doesn’t mean the owner will encounter the same problems on a larger scale, but they will need to adapt to, and manage, a whole new set of challenges to maximise their probability of success.
There are a variety of ways a business owner can look to expand their existing operation to increase revenue and brand awareness.
Whether the owner sets up another outlet themselves, acquires a competitor, sets up a distribution network, recruits agents, licences the business opportunity or sets up a full business format franchise model will depend upon their goals and preferences.
Whichever development options are being considered, they need to be thoroughly researched and planned to calculate the benefits and pitfalls before pressing ahead.
The most common way for a business owner to expand is to open another outlet or office themselves. Usually, the owner waits until there are sufficient profits in the original business to fund the expansion or finances the new outlet through a lender. Growing a business organically can take time to build a client base and, therefore, revenue.
Acquiring a competitor, whether locally or in another area, can boost a business with a ready made client base and income stream. However, it means taking on existing staff and contracts, which could be a burden to your business.
Businesses are bought and sold all the time, so this could be a viable option if a suitable competitor is willing to sell when you’re looking to buy.
Establishing a network of agents, distributors or wholesalers to sell your products can be an effective method of accessing your target market without building your own sales presence.
Contractual obligations will be an important consideration with this type of arrangement and the ongoing management of the relationship can be tricky.
Whether you use an agent, distributor or wholesaler depends on your individual circumstances and what you’re trying to achieve.
Licensing is a widely used brand expansion and marketing method, whereby the business owner maintains control of their brand image, but allows someone else to sell their products or services, usually without controlling the business operations of the licensee.
In return for the licencing rights, you would receive a royalty on the revenue achieved by the licensee.
In many ways, franchising your own business is one of the most challenging development options a business owner can choose. However, it can also be one of the most rewarding and successful expansion options.
With a franchise, an investor will be buying the rights to use your already proven and successful business operating model and brand name to run what is effectively an independent branch of your company.
With some of the business expansion methods mentioned, you can do it yourself with some practical legal, accountancy and tax advice and the necessary groundwork being laid.
Franchising, however, can be a complex process and there are many ways for you to trip up if you don’t get the right guidance and support. For the unsuspecting business owner, trying to franchise your business without professional support is a foolhardy and perilous pursuit, which can become a significant burden on time and resources.
There are general business consultants with a basic understanding of franchising who will tell you they can do it for you, as well as untrustworthy franchise consultants who will tout for your business. These can be, on the face of it, enticing offers as they’re usually considerably cheaper routes than using a reputable franchise consultant.
But don’t be tempted to try to franchise your business on the cheap. If you do, there’s a strong probability you’ll be opening yourself up to substantial problems down the line, which could be challenging, time consuming and costly for you to resolve.
Also, banks are unlikely to support you or your franchisees if you haven’t taken the appropriate professional guidance from a respected franchise consultant.
Without any doubt, the best place to research and find a suitably experienced and knowledgeable franchise consultant is to do so through the British Franchise Association.
The bfa oversees ethical franchising in the UK and accredits professional advisers who have demonstrated their franchising expertise to them. The Lloyds Bank franchise unit can also point you in the right direction by introducing you to experts in the sector.
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