Should You Franchise Your Business?

Have you ever wondered what it might be like to franchise your business? Whether you’re just starting in the business world, or you’ve been running your company for a while, it’s important to note all the possibilities to help your small business grow. One of those possibilities could be making the courageous jump to franchise your business. 

What is a Franchise? 

A franchise is a form of marketing and distribution where the owner of a business system allows a group of individuals to run a business that sells a product or service under the franchisor’s name. For example, Dunkin’ Donuts is a franchise with over 8,500 of its restaurants in the United States alone. 

Is There a Difference Between Franchises & Chains?

While a chain is a business with multiple retail locations that one parent company operates, a franchise is a type of business where the original parent company sells its license to a franchise location. Each franchise location has a unique owner while every chain store location is owned by the parent company. 

Benefits of Franchising Your Business 

Owning a franchise can come with many advantages. One reason to own a franchise is to gain access to capital. With a small business, it can be difficult to break even with all the funding you put into starting your business from the ground up. However, by franchising your business, you can gain capital gradually, without taking on debt from loans.

Another reason for franchising your business is splitting the burden of costs. With one business, all of the money and time is put on one single business owner. When there is another franchise location, all that cost and time can be split amongst the different owners.

Franchising your business can also increase your brand awareness. The more locations where individuals can find your company, the more people will learn about your business. This in turn can cause the brand to be more successful and more profitable. 

When franchising your business, you will also reduce the risk for your business. This is because when you license your brand, you no longer have the responsibility of the additional locations that are opened under your brand. Yet, you are still earning money from the fees paid towards other franchises operating under your name. 

Disadvantages of Franchising Your Business

While there are many benefits to franchising your business, there are also some disadvantages. For instance, when you hand over your license for a franchisee to open a business under your name, you lose total control over the brand. As a small independent business owner, that could cause some complications when making game-time decisions for your company. 

Also, getting into a business agreement with other people can open you to possible legal disputes. If you do come across disputes within your franchisee, you’ll waste time and money on lawyers and possible court cases. 

There are many reasons why you should or shouldn’t franchise your business. In the end, it’s up to you to weigh the pros and cons of these decisions and how they can affect your business in the long run.

Categorised in: Business Plan