Advantages of the franchise business model

Fast food may lead the way in franchising, but it’s possible to become a franchisee in many, many other industries.

By Will Sanford

Franchising is a tried and tested business model. It has a stellar track record of success across industry sectors. After years and years of steady growth, it has evolved into a booming economy. Many have found that, when done right, this approach can give entrepreneurs the best of both worlds. They are in a position to retain the freedom of being their own bosses and at the same time, gain a sense of security and peace of mind. So, here is why you should use this tactic to overcome growing pains and fulfill your entrepreneurial dreams.

A two-way street

Franchising is considered to be one of the best growth strategies ever invented. It involves one party (a franchisor) bestowing rights of a particular name and trademark to the other party (a franchisee). Often, the franchise license also grants the use of company systems, software, signage, and other proprietary tools. There is a clear system in place, which defines agreed upon terms, guidelines, and relations between partners.

Franchising has benefits that other business models fail to offer. First of all, it lowers the barriers to entry for all sorts of entrepreneurs, including those searching for 9-5 career alternatives. It is a viable form of capital acquisition, which spurs growth without the risk of debt or the cost of equity. A franchisee is able to grow by tapping into the resources of another, more established brand and chain. This warrants expansion, while eliminating any contingent liability.

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What is more, a franchise strategy provides a detailed, step-by-step, ready-to-go business blueprint. It streamlines decision-making and related requirements, setting clear rules for core business aspects, such as marketing materials and working hours. There is also an ongoing support coming from the side of the franchiser. These pros facilitate the process of gaining traction, spreading brand awareness, and building a solid customer base.

So, let us say there is a mechanic who wants to own his own business, but struggles to overcome obstacles, from lack of business knowledge to insufficient funds. Well, he can rely on services that offer mechanic business for sale and franchising. This fruitful collaboration secures marketing, training, financing, and other kinds of support. There is even an income guarantee. Hence, it is much easier to hit the ground running with this business model and accomplish fast and steady growth.

All of this mitigates the risks that are typically linked to launching and scaling a business. There is ample capital to fuel faster growth and motivated management pulling the weight. Speaking of which, the franchisee usually does not have to spend weeks or months looking for or training good unit managers. One can simply substitute an owner for the manager, who is then materially invested in the success of the business. This creates a sense of long-term commitment and improves the quality of operation.

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There are some limitations that businesspeople must be aware of. Most notably, a franchisee must run and manage a business in a way that corresponds to the operations manual, as well as terms and guidelines in the franchise agreement (contract). This may put off those who want absolute control over their company. Also, those who want to become a part of the franchise must come up with an upfront payment (franchise fee) and cover ongoing royalties.

The fees usually range from $25,000 to $100,000 (for a Master Franchise in the league of Jan-Pro Cleaning Systems). The royalties, on the other hand, tend to be based on the percentage of the gross income, although some franchises have a flat monthly fee. One final thing to keep in mind is that, in order to set up a franchise, one must invest time in handling the legal requirements. But, in general, the benefits outweigh the disadvantages by a landslide.

Have a head start

Franchising is a sound course of action for those eager to overcome obstacles on the road to owning a business. The advantages mean that the upfront investment is likely to pay dividends down the road: you are empowered to grow your business exponentially, while avoiding all the pitfalls. The risk is limited to the investment you make in developing a franchised business. That being said, franchising is not a one-size-fits-all solution. Do the homework and make sure it is the right option for your business ambitions and goals.


Will Sandford is a Sydney based wood architect, blogger and contributor on interior design and ecology blogs. Besides that, he is also interested in home improvement combined with green technology. In his spare time, Will enjoys surfing and rock climbing. He is a regular contributor to SmoothDecorator website. Connect with Will on his Twitter account.


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