Starting your own business and watching it grow from scratch is a great milestone but also challenging. It takes time for brands to grow and become sustainable. Some small businesses decide to work under big brands to grow their business faster. This practice is known as franchising and enables established brands to work with entrepreneurs to expand and grow businesses. Contrary to what most people think, franchising can be very successful. If you are wondering what if franchising, it is a business agreement where the franchisee buys brand rights from the franchisor. The franchisee can freely operate under an established brand while adhering to structured framework. Here are advantages of franchising your small, unknown business.
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Established Brand Recognition
The greatest advantage of franchising is getting the privilege of operating under a well-established brand. In the business world, customers are more likely to trust a popular brand, particularly in industries like hospitality and retail. If you are a small business owner, franchising allows you to gain an existing customer base and enjoy credibility of an existing reputation without the need to build a brand from scratch. You spend zero money and time to create a brand.
Proven Business Model
The franchising agreement requires the franchisor to provide the franchisee with a detailed roadmap to run a successful business. This is valuable to first-time entrepreneurs as it helps them to successfully navigate the business with the help of experts. When you franchise your business, you reduce the risks associated with starting a new business since you are provided with operational guidance and marketing strategies. You benefit from framework that has already been tested and optimized for success. You avoid the messy process of trial and error and the main brand has already done that for you. your role is to just sell already known services or products.
Collective Purchasing Power
Working under an established brand allows you to benefit from high purchasing power. Franchise networks usually negotiate with suppliers to obtain bulk discounts for all their establishments. When operating a small solo business, you will most like not be able to negotiate for lower prices. For example, a convenient store can source high-quality products at discounted prices since the franchisor already have negotiated for price agreement. This enables the franchisor to enjoy high profit margins and achieve operational efficiency.
Lower Failure Rate
Franchise development usually involves preparing and planning a business for expansion through franchising. This planning helps to make sure that all the franchises that will be opened are successful. Typically, the franchises will have lower rate of failing compared to individual businesses since an established brand has already planned their success. The franchisee gets to join and operate under an already successful brand and a network that supports and advise them. This reduces the chance of missing the road and following the wrong path. Additionally, the franchisor has already proven their concept. This means that you are assured that the products or services you offer are on demand.
In conclusion, franchising is a popular strategies used by many business to expand and grow. While the franchisor benefits from the agreement, the franchisee benefits too as we have seen above. They get to start and run a business under an already successful brand. They enjoy a good reputation from well-known business making their outlets easier and profitable than they could be if operating solo. Other advantages include operational and financial support, lower failure rate, collective purchasing power, faster growth, lower costs and easier management.