Over the previous decades, franchising has evolved into one of the most popular ways that companies grew their network. It is a simple business model that is based on letting others buy rights from the original owner. So, if an entrepreneur establishes a brand and wants to expand without investing much of their own capital, they can do so. They simply find those willing to invest in the brand and open their own stores somewhere else. In return, the original businessman usually charges a one-time fee with perpetual payments based on revenues.
Although this entire approach may seem very mindless and easy, it is actually far from simple. In fact, franchising is one of the most complex ways to organize an entity. Regardless, however, it has undoubtedly yielded organizations who are greater in size and expand faster. So, what are some of the most revolutionary transformations that franchising brought to America?
Since starting a franchise requires one to buy the rights, they are also paying for a good support system. For instance, almost all franchises go out of their way to help the new owners set up. The reasoning behind this is the fact that additional revenues for those new sale-points will directly increase the franchise’s overall revenues. Remember how most of the original owners have something called revenue-based fees that are paid every month. Thus, if the franchisee has $100,000 in earnings, as much as 5-10 percent of that could go to the franchisor.
So, franchisors will usually do their best to facilitate an easy start-up process. Doing so helps them push the new owner into profitability.
Creativity Needs are Limited
Unlike most other businesses, franchisees are not required to be overly creative. This is because the vast majority of franchisors have very specific requirements to satisfy. For instance, someone who is buying a fast food store will have many predetermined rules. They may have to buy supplies from a few selected outlets, enforce certain employee rules, and so on. As a consequence, the so-called “gray area” is almost non-existent.
Compare this, on the other hand, with sole proprietors who are starting new companies from scratch. They will often have to think about unique marketing approaches, solid brand ideas, and many more important factors. Consequently, they must spend a lot more time raising the brand’s awareness and establishing credibility. Well, franchising allows one to side-step this portion of the process as most franchising opportunities revolve around successful brands.
Another significant benefit related to franchising is the hands-on training. For most businessmen, running a franchise is possible without previous experience. This is because industry training offers more than enough information to help one get started. So, hypothetically, one could be completely unfamiliar with the process and still become a business owner.
Additionally, the franchise training offers benefits that are on-going. In translation, people will get important training whenever the franchisor decides that they should. Take Cambridge Franchise Holdings and the way that they teach their workers how to evaluate a store. With dozens of their “Burger King” restaurants all over the country, this business coordinates necessary training as it becomes needed. So, when there are new trends or employees at Cambridge Franchise Holdings, everyone is likely to be trained for success.
Independence with Support
One of the most appealing things about franchising is the independence it provides. Although there might be rules directing some day-to-day decisions, every franchisee exercises full autonomy. In translation, franchise owners decide who to fire and hire, how to run their business, and so on. In a way, their venture could be compared to traditional sole proprietorships.
The biggest differentiator, however, is the fact that franchising offers unbeatable support. In places where sole proprietors usually run into problems, franchisees get help from franchisors. That way, the odds of their business overcoming the rocky stages are maximized. Additionally, buying a franchise may often be cheaper than starting a brand-new venture. It does, after all, come with the rights to intellectual property that one will not have to invent. Thus, it may be a great alternative to starting from the very bottom.