Is it time to franchise your business?

So you have been growing your business successfully, and it may be time to expand. Franchising your business is a great way to expand. Understand what the pros and cons are to creating a franchise business.

Potential advantages

Franchising provides additional cash injections into the business, which will help the expansion.

You can remove yourself from the employee problems that usually occur with opening new branches.

Franchising helps you grow into other areas that you would not normally consider.

The individual franchise owners are motivated to succeed.

Disadvantages of franchising

You do not have 100% control over the running of the business.

Don’t see sharing of profits as a downfall, as the overall successes can outweigh this downfall.

Both franchisee and franchisor need to make a profit. So the business needs to succeed for that to happen.

What do you need to look out for?

All the legalities that relate to starting a business are doubled with a franchise setup. Ensure you have watertight contracts in place, so there is no room for misinterpretation of fees, structure, buy and sell agreements, etc.

Head office does the owning or renting of property space. But, again, these need to be well-written contracts, so there is no opportunity for the franchisee to take over the leases and cut you out.

Training of staff, uniforms, supplier contracts, and systems all need to be put in place to ensure a uniform rollout of the business. It also requires additional audits for head office to be kept in the loop and for standards to be maintained.

It is advantageous to grow slowly. A speedy rollout can cause issues regarding staff training, and the backlash from unhappy customers can damage your reputation. By ensuring you have a working model first, you can prove a profitable model and have more opportunities for potential franchisees.

Consider using your existing staff to roll out new stores, as they come with the experience and company culture that they will entrench in the new store. In addition, by using your current employees, they feel part of the expansion and less threatened by the expansion plans.

If your business needs help with cash flow or growth business loans, get in touch with us on 0861 93 93 93 or email us on info@bizcash.co.za.

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