I Want To Franchise My Business. What Are The Advantages?
There are two big advantages of franchising. First, you will be using other people’s money to grow your business. Your franchisees will have to pay an initial fee to take a franchise and fund all the working capital for their businesses.
Secondly, you are capitalising on the fact your franchisees are not simply employees earning a salary, but are individuals who own their own businesses. What this means is that they will try harder to make a success of the business than would otherwise be the case with an employee.
There is a great deal of evidence to support the view that franchised businesses do better than nonfranchised ones. Indeed, McDonald’s recently announced it was converting all its company owned outlets in the UK to franchises because the franchise outlets performed much better.
There is, however, a price to pay for these advantages. The skills required to make a success of franchising are different than for a non-franchised business, franchisees need a lot of handholding and you have to share in the profitability of the franchisee’s business, which would not be the case if you owned the business yourself.
John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.
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