Deciding whether you should franchise your small business to accelerate expansion and supply more capital or if you should maintain a company-owned model depends on numerous factors. Understanding the benefits of both business models can help you begin to determine which model offers the greatest benefits for you and your business.
Franchising your business gives you an advantage when it comes to funding. Instead of having to take out business loans or use your own money to fund business expenses, you use others’ money to expand your business into new markets. Using others’ money to expand into other markets allows a business to potentially expand faster than if it were to stick to a company owned model.
A company owned business model allows you to stay more flexible as you navigate novel or changing situations or markets. If you want to institute changes to products or practices in your business under a franchise model, you may need to negotiate changes with the franchisees and write new franchise agreements. With a company owned business model you have the freedom to institute changes with greater speed and ease.
Expanding your business into new markets requires effort as you look for one or more locations for your business, deal with local laws and regulations and learn the local resources you may leverage to promote your business in the area. Franchising shifts these activities to the franchise owners as they bring their own knowledge and skills to the organization, but you do not have to pay wages or provide benefits to these people since they are not your employees. With company owned businesses, you must have more management to oversee the greater number of employees you have working at each location, requiring more internal resources from the company.
Franchisees have a very personal reason to work hard and ensure the business performs well, since they have invested their own money in the business. If the business performs well, the franchisee stands to gain monetarily and if the business fails, the franchisee may lose his investment in the business. Franchising your business allows you to assume less risk, spreading the amount of risk to the franchisees as well. A company owned business model does not leave the business open to lawsuits that result from the actions of others, which is a reality for some franchisers as a result of the actions of franchisees.
By Steven Symes, Demand Media http://smallbusiness.chron.com