Franchising A Business
With the company store doing well, and the desire to expand your business, you will likely consider self-expansion as your initial method for growth.
It only makes sense, as your managing and funding the growth of your business puts you in complete control, and makes you the primary benefactor of the value increases along the way.
Franchising A Business
Expanding on your own, however, has its dark side. First, you and you alone (or with secured or equity shared capital) will have to fund the entire costs of expansion. Depending on your business model, expanding by only a few units could amount to millions of dollars of new capital investment.
Further, expansion urges usually come at a time when owners are just beginning to feel the positive cash flow effects of their successful ventures, so facing the prospect of significant reinvestment and sacrifice cannot come at a worse time.
Aside from the capital expense, let us not disregard the challenges associated with recruiting, hiring, training and retaining high quality management and staff to operate the additional locations developed. Remember, in most cases, there is only one owner, and taking on any material expansion strategy of your own means that you are going to be faced with the senior management and operational aspects associated with each location. Your ability to hire and keep good employees will be critical to your self- expansion success and if doing so is outside your normal comfort zone, then it is recommended that you either defer this skill to another executive, or select an alternate expansion method.
With money and management discussed, there still remains a fairly daunting list of tasks and responsibilities facing the owner that chooses to expand independently. They include, site selection and real estate or lease negotiation and financing, general administration, public relations, advertising and crisis management. As each location is being developed and comes on- line, the time commitment and task list will grow accordingly for the owner.
As you can see, considering the money, time and risks, self-expansion is a significant achievement for any business owner. Franchising, by contrast, enables owners to leverage the capital and time resources of their franchise “owners” and thereby expand their brand while mitigating the total risks to their capital, their current business assets and their calendars.