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Why you should franchise your business in 2021

Why you should franchise your business in 2021

Considering how to scale this year? Use the strategy implemented by hundreds of companies that have become big-name brands

Occasionally, a set of circumstances come together that create an irresistible commercial opportunity. 2021 is exactly that because all the stars have aligned for any business considering how to scale this year.

More than at any other time, if you have responsibility for expanding your business you simply must look at franchising - even if you’ve previously discounted it. Set aside everything you thought about franchising and read on. It may be the best five minutes you ever spend in business.

More fish in the sea

Firstly, there are more potential franchise buyers now than at any other time in history.

Economic downturns create job losses and business closures. Forget COVID for a moment because a recession is what we’re talking about. Recessions are welcomed by those who are looking to recruit franchisees and there’s a lot more demand for franchises right now.

Pressure on second incomes

When one person is a breadwinner and things get tough for them, the other party contributes. This can often mean demand for part-time or flexible format franchises increases. This is the case for thousands of households now and will be for the next few years in all likelihood.

Franchising can be highly profitable

The process of franchising is often more profitable than the business itself.

A peculiarity of the franchise industry is that franchisors often make more money from selling franchises than the actual business earns in its normal operations. I’ve lost count of successful private businesses that have experienced this.

The ongoing royalty from, say, 40 franchisees, added to the initial investment they make, often runs into seven figures.

The impact of Brexit

As a result of the UK leaving the EU, the government needs to stimulate the start-up economy. This point on its own might be the best reason why you should franchise your business this year.

Lime Licensing Group can also usually obtain a government start-up loan for potential investors. This removes the biggest hurdle potential franchisees face, leaving the pathway clear to buy your franchise.

More investors chasing fewer franchises

Imagine pre-COVID levels of demand for franchises across all sectors of the economy. That demand is now compressed into fewer sectors, as many investors shy away from franchises that have been adversely affected by the coronavirus crisis.

This means there’s more demand chasing fewer franchises. So if your business still works in a lockdown scenario, franchising it this year represents a wonderful opportunity.

Significant return on investment

Creating a franchise system that could roll out nationally and internationally is cheaper than buying a single franchise. It sounds difficult to believe, but it’s true.

Lime’s team can design the entire franchise system at a price that gives you a 100 per cent plus return on investment after selling just one franchise. The franchise ‘department’ can then be cash flow positive thereafter.

Create a new income stream

In addition to selling widgets, your business is now selling franchises too, which represents a whole new income stream.

What’s more, you’ve probably already got everything in place to do it. All you need is a franchise consultant and it’ll happen for you.

Expansion where you couldn’t easily expand before

Imagine you’re a cleaning company in Swansea. How easy is it for you to operate in Dundee? It would probably be quite tricky.

A franchisee will do a better job than you. They live there and have personal and professional contacts they can utilise. Their children go to the local school. They’ll do it better than you ever could.

They’ll also pay you handsomely to learn what you already know to replicate your Swansea business in their local area. Doesn’t it make sense to franchise where you can’t fully optimise your business yourself?

Franchising is now the number one business expansion route. It’s a £17 billion-plus marketplace and there are record levels of potential franchise owners and competition for the best opportunities.

10 reasons to become a franchisor

1. Lower risk involved

When you’re starting a new business, there’s always going to be an element of risk involved. Not knowing if your concept will be successful takes a leap of faith. However, when you franchise a business you’re already capitalizing on a proven model, one with the infrastructure in place to hit the ground running.

2. Compete with the big names

Often, smaller independent businesses have to be content carving out their niche and taking a smaller market share. Franchising can allow you to expand your reach and compete with the more prominent names in your sector.

3. Build a network of creativity

Businesses should always be looking to innovate, launch fresh products and find ways to improve their marketing and offerings. By franchising, you can build a network of like-minded people who understand your vision and can bring new ideas.

4. Access to capital

Capital is one of the biggest barriers to the expansion and growth of any small business. This is something that can be solved when you choose to franchise a business. Franchising allows a business owner to expand without the potential risks that come from debt and equity costs.

5. Better management

Finding good people to oversee your business can be a challenge, but through franchising, you can open up a broader realm of possibilities. Because your franchise partners are fully invested in the business, you usually attract candidates with more determination and commitment than employed staff would ever provide.

6. Quicken your growth

When it comes to growth, time is of the essence. If you don’t expand as quickly as possible, your potential window of opportunity could close fast. Because franchising builds on pre-existing infrastructure and allows you to reach new and untapped markets, it can ensure you maximize your potential for growth.

7. Easier supervision

Because so much of the day-to-day running of each franchise will be left to the owners/managers, you’ll be freed up to spend your time focusing on the big picture problems and ideas that will ultimately guide the fate of your business.

8. Better valuations

Because of the factors we’ve listed, as well as the positive perception of franchising in general terms, if you do decide to sell your business it may be valued at a much higher figure than if you’d opted not to go down the franchising route.

9. Increase your business knowledge base

By franchising, you can tap into a knowledge base that will help you gain the upper hand on your competitors. This could mean using local knowledge and market understanding or the benefit of someone with experience of your sector.

10. Build brand awareness

By franchising, you can amplify the effects of your marketing efforts, extending your reach and improving overall brand awareness.

The author

Andy Cheetham is managing director of Lime Licensing Group.

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