Franchising is widely considered the most dynamic method of business expansion ever developed, with high up-side potential for both the franchisor and the franchisee. By Jerry Rieder

Franchising 101

Mutual Benefits of Franchisors and Franchisees

Franchising is widely considered the most dynamic method of business expansion ever developed. By franchising, many businesses have grown from a minimal of units (or just one) to hundreds or sometimes even thousands of units within a few years. No other approach has ever come close to the market scope and growth rates offered by franchising.

The franchise method of expansion has high up-side potential for both the franchisor and the franchisee:

Advantages to the Franchisor

  • Expand your business much more rapidly than if you grow only through company-owned outlets.
  • Because franchisees typically contribute to an advertising fund which you control, you can expand brand awareness without financial commitment on your part.
  • The franchisees provide the capital for expansion, which allows a high degree of financial leverage.
  • Because expansion at the unit level is financed by the franchisee, your company takes minimal risk.
  • Franchisees are far more motivated to maximize sales and profits than salaried managers.
  • Franchisees are also typically more responsive to local markets than salaried managers, and usually can more readily achieve local public awareness/recognition of the business.
  • Finally, franchisees are often an important source of new marketing and product ideas, which can benefit your entire franchise network and increase the royalties you receive.

Advantages to the Franchisee

  • The franchisee buys into an already proven business concept – she does not have to reinvent things.
  • Through training and manuals, franchisees have a well-defined process upon which to launch and operate their business.
  • As issues arise, he can turn to the franchisor for advice and expertise.
  • As the franchise network expands,
    she receives the benefits of enhanced brand recognition.
  • As franchisees as a group gain experience, they can provide support to each other, answering questions and providing support.

To summarize, the franchisee is in business for himself, but not by himself. Despite these very powerful advantages, franchising, like any other business activity, does carry risks and requires significant effort as well as preliminary research before investing. It is not without its challenges but has high up-side potential and can be very rewarding once you have found the right business model and fit that aligns with your business goals, objectives, areas of interest and investment level.

– Jerry Rieder

Jerry Rieder, CFC, has been a franchise consultant since 2012. He became part of the FranServe Training and Development Team in 2013 and has helped a large number of consultants become successful. His compassion and desire to see others achieve drives him to share his techniques and best practices with new and experienced consultants alike. He serves as a trainer, a mentor, and also as a facilitator for FranServe’s Power Teams. His prior 25+ years of management experience with Fortune 500 companies provides the foundation for aiding others to achieve their goals. Contact Jerry at jerry@franserve.com.