If you are a business owner who has been experiencing strong growth, then you may be considering expansion. However, going from one location to two locations can be quite costly. And that’s not even considering the fact that you’ll end up having to do more than twice the amount of work in order to ensure that your second location succeeds.
Trying to expand to more than two locations may seem like a near-impossible task considering the workload involved with just running two places of business. Which is why, if your business is in a good position to expand, you may want to consider franchise development.
What is Franchise Development?
By developing your business into a franchise, you can reap the rewards of strengthening your brand name without taking as much financial risk. Basically, you bring in another business owner in order to run a second (or third or fourth, etc.) location of your business.
They will use the name of your business and sell the products or services that your business provides. Some of the most successful companies in the world are franchises.
Although you don’t have to take on the workload of opening another location, franchise development isn’t an easy task. It can still fail if you don’t develop a plan. The following are a few things you need to know about franchise development.
- Your business may not succeed everywhere — Some businesses simply won’t succeed as franchises, and some won’t do so well in certain parts of the country, depending on the services or products you provide. For example, if you own a fish and tackle shop and want to franchise it, allowing a franchisee to open a location in the desert is a recipe for failure.
- Understand that there are still risks — Just because you don’t have to invest as much financially doesn’t mean that the failure of a franchise won’t affect your business. It will hurt the reputation of your brand and will keep it from growing further. This means you have to be very careful about who you sell your franchises to and how many franchises you allow to open up.
- You still have to support your franchise owners — Just because franchising is less time consuming and financially draining as opening another location yourself doesn’t mean there’s no work involved. You’ll have to provide your franchisees with support to help them get off the ground, such as training regarding your products and services, as well as marketing support.
How Can Franchise Development Make You Money?
A franchisee will pay you a specific fee that’s determined by you in order to open up one of your franchises. There are a lot of legalities involved, but once those are agreed upon and written down in the franchise disclosure document, the fee will be paid in return for the use of your brand name, the right to sell your products and services, and your support.
You will also get a certain percentage of the gross profits that your franchises make, providing a steady stream of income once the franchise becomes established.
These are all short-term profits, though. If your franchises continue to grow, your brand name will grow substantially, which is where the real benefit lies. The bigger your brand identity grows, the more value it will take on.
These are a few basic things you should know about franchise development and how it can make you money. If you believe that your business may be suitable for franchise development, then be sure to contact us at Transworld for additional advice today.