Is it Time to Turn Your Business into a Franchise?

Is it Time to Turn Your Business into a Franchise?

Is it Time to Turn Your Business into a Franchise?

By Shelly Sun

After creating a successful business, many wonder what options there are to grow in today’s business climate. Without access to significant capital, it’s challenging to contemplate growing from a few locations to hundreds or thousands.  You’ve most likely invested plenty of dollars to build your business, secured trademarks, developed your brand, documented processes, implemented technology and hired staff, all resulting in a solid foundation. But in this economic environment, it can be difficult to know when is the best time to expand in the smartest, risk-controlled way.

Here are five reasons why now just might be the best time to expand:

1. Expand Your Thinking on Expansion: You have a product or service that customers want. Eventually there comes a point when you begin to wonder how to reach more customers. The traditional approach involves raising capital to allow you to open more locations. This can grow your brand, but it also means expanding your business is all up to you. You will be securing and signing for the debt or outside equity, ultimately taking on the increased risk of expansion.

Another avenue for achieving growth in revenues and customers, with limited capital and less risk, is through franchising. Franchising is a great vehicle to help you reach more customers, promote your brand, and increase your visibility and credibility as a brand.  However, opening additional locations on your own could take hundreds of thousands – if not millions –of dollars that are not easy to access through traditional financing today.

2. Know the Leverage Effect: In thinking of ways to leverage the large investments you’ve made already, franchising can be great to scale your brand to more markets, building upon those investments and years of fine-tuning that made your business a success. Franchising links your expertise and investments with capital and personal oversight to replicate your model in a new geographical market. You may want to expand regionally, nationally, or globally, and franchising is often a less capital-intensive (and proven) way to do so, with less risk and more upside than many other methods of brand expansion.

Opening more company-owned locations requires significantly more capital than opening locations through franchising. Given that lenders are facing a stricter regulatory environment, record high and long-lasting unemployment rates, and less business collateral, creativity and innovative ideas are required to figure out the best way to expand with limited access to capital. The beauty of franchising is that the geographical expansion into new markets also uses the capital of the franchisees, in essence allowing the brand to expand using other people’s money.

3. A National Strategy – Creating Jobs Locally: In addition to taking less risk in terms of capital investment, franchising mitigates the challenge of trying to take your local business and manage it in the next state – or six states away.   Franchising spreads the risk between the franchisor and the franchisee. By experiencing mistakes and fixing them to develop a solid business model that franchisees can replicate, the franchisor has developed and protected the brand and the systems that the franchisee can license and use in its business.

4. Succeed and Grow Together: Franchisees invest capital to grow their local business while spending less time and resources to figure out the business. As a franchisor, you’re licensing your knowledge to the franchisees. In doing so, you will leverage the investments you have already made in your brand and in your systems. In return, you earn a stable revenue stream.

Franchising is also a powerful mechanism for accelerating growth. Franchisees provide new sources of passion, ideas, and capital. Franchisees work hard to build local businesses and spread the word for the brand and bring great ideas back to make the business model stronger for everyone.

5. Franchising: Be In Business For Yourself, Not By Yourself: To be a franchisee is to be in business for but not by yourself. When done right, franchising benefits the company that wants to expand geographically and benefits the franchisee who gets to learn the business and execute the model at the local level.

Launching a franchise system is a big step – it requires evolving your leadership and growing your business from a successful local one to a larger regional, national, or international brand. You will be the ambassador within your organization who will set the tone and the passion for the opportunity that franchising can provide when it is done with absolute commitment to the interdependent relationship with your franchisees.  Franchising provides a means for you to grow and expand your business, reach more customers, empower others to own their own businesses and create countless jobs. 

Shelly Sun is a Certified Franchise Executive and CEO and Co-Founder of BrightStar Care®. She is author of the forthcoming book, Grow Smart, Risk Less: A Low-Capital Path to Multiplying Your Business Through Franchising, which will be released October 4, 2011.

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