Is Franchising Right for Your Business? : Managing :: American ...

Your business is running smoothly and you have a strong desire to grow. Your customers ask you all the time if you have other locations. It?s time for you to expand (congratulations!) but you're not quite sure how to do it. So what is the best growth strategy for your business? Should you open more company-owned locations or franchise your business? Here are the pros and cons of both

Company-Owned Expansion

This may be the best option if you are well-funded to open multiple locations quickly.

If you open more locations yourself, you will make more money as you retain all profits from the business. You will maintain control of all aspects of business operations and keep trade secrets "in the family.? You?ll have the option to share resources and employees between your locations. If you go this route, you?ll want to research the demographics for each location, so you can properly market and advertise your business.

Sounds great right? The challenge is, you?ll also need to fund each location and be responsible for all costs. Basically you will have 100 percent liability for each location which means you are responsible for the management and operation of each, including hiring and training of managers and employees. Finding solid employees to rely on is key in order to minimize turnover. Constantly training new employees can erode your profits and create burnout, not to mention be a drain on your precious time.

Another challenge for the company-owned route is the rate at which you can expect to grow a viable brand. If you?re looking for your business to become well-known and recognized, you?ll want to open more locations in a short amount of time. But this may lead to slower growth and branding opportunities as this is contingent upon how much money you have to devote to the startup costs involved with each new location.

Franchising Your Business

This may be the best option if you don?t have or can?t obtain the funding necessary to open multiple locations quickly.

If you franchise your business, you won?t have any fiduciary responsibility for each location nor will you be responsible for hiring employees or the daily operations for each location. You?ll become less involved in the day-to-day operations of your business and become more of a mentor, which means you will need to make yourself (or key personnel) available to counsel franchisees when they seek assistance.

You will, of course, have to spend resources and time to recruit franchisees. Additionally, you?ll be expected to continue growing your brand, but in the interests of the entire system. For example, creating new programs and services or introducing new products and marketing pieces may fall under your jurisdiction, but they?ll be for everyone to use. If you franchise, you?ll inevitably have to ?let go? and allow others to operate your business (as long as they follow your standards).

But through franchising, you may experience rapid expansion into markets you couldn?t otherwise reach, which will support yours becoming a well-known brand. You?ll receive an ongoing fee (royalty that can be structured a number of different ways) for each franchise rather than share in the profits. Note these revenues may be less than profits from company-owned locations, especially in the beginning.

Of course, everything is not always black and white. Some things just "feel" right. It?s the "fire in your belly" that drives you and many other successful entrepreneurs?passion, motivation, initiative and a strong belief in your business are what got you this far. Now may be the time to either invest in opening other company-owned locations or harness what has made you successful so you can teach others how to be operate your business in their market.

Here are a few questions to ask yourself if your gut is leaning towards expansion:

• Are your services and/or products unique and different?

• Is there a demand for your services or products?

• Is your business profitable?

• Have you created a unique way of doing things?

• Does what makes you different from your competitors directly contribute to your success?

• Do you have ?copycat? competitors popping up?

If you answered yes to any of these questions then you are obviously doing something right. Take a look at your business to determine which expansion solution makes sense for you based on the comparisons above. If franchising is the direction you choose, then know you might very well be bringing into your system equally as enthusiastic entrepreneurs who will invest their time, energy and resources into opening and running your business in other markets.

OPEN Cardmember David Waldman is the founder of The Franchise Maker^? which provides comprehensive franchise development services to business owners who wish to franchise their business nationwide. The Franchise Maker^? is recognized in the industry for making the process to franchise easy, fun and affordable.

Source: http://www.openforum.com/articles/is-franchising-right-for-your-business

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