Why Now Might Be the Right Time to Franchise

You have a great local business. You have a product or service that your 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. True, this approach can grow your brand and bring in more customers, but it also means that expanding your business is all up to you. You will be securing and signing for the debt or outside equity and ultimately taking on the increased risk of expansion.

Shelly Sun, CEO and co-founder of BrightStar Care, a caregiver placement agency with more than 200 locations, thinks now might be the best time to expand your business. Sun, the author of the forthcoming book "Grow Smart, Risk Less: A Low-Capital Path to Multiplying Your Business Through Franchising" (Greenleaf Book Group Press, October 2011), gives BusinessNewsDaily five reasons business owners should consider expanding their business now.

Expand your thinking on expansion. —  Franchising allows you to achieve growth in revenues and customers, with limited capital and less risk, though many business owners do not consider it. Franchising is a great vehicle to help you promote your brand, and increase your visibility and credibility as a brand.  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.

Know the leverage effect. — Franchising can be a great way to scale your brand to more markets and build upon existing investments and years of fine-tuning that made your business a success locally. Franchising links your expertise and investments as the franchisor with the capital and personal oversight of a franchisee to replicate your model in a new geographical market. You are able to leverage the passion, commitment and capital of the franchisee to deliver your goods and services to more customers across a larger region. You may want to expand regionally, nationally or globally, and franchising is the least capital-intensive (and most proven) way to do so than any other method of brand expansion.

A national strategy, creating jobs locally. — It’s not just about the money. In addition to taking less risk with 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 enables great local ownership where business owners invest not just in your concept, but in the community they serve. Franchising spreads the risk between the franchisor and the franchisee. The franchisor has invested in the pilot locations and secured their initial success. 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 franchisees can license and use in their business.

Succeed and grow together. — Both the franchisor and the franchisee benefit from this approach. Franchisees invest capital to grow their local business , but they don’t have to spend significant amounts of time and resources to figure out the business. As a franchisor, you’re licensing your knowledge to them. 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, normally based upon the revenue results of your franchisees.

Be in business for yourself, not by yourself. — Franchisees are acquiring the right to use the brand and the systems to get started faster and with stronger resources than they would on their own, and that right has considerable value. Essentially, to be a franchisee is to be in business for yourself, but not by yourself. The franchisor benefits in offering this opportunity to a franchisee because it helps offset past, current and future investments in the brand and in the operating systems. When done right, franchising benefits the company that wants to expand geographically and benefits the franchisee who gets to learn the business and manage the model at the local level.


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