For many people running a successful business, the question of whether or not to franchise is crucial to the long-term health and well being of the company. With every business decision, there are a number of pros and cons that should be considered. To help break this down for you, we went ahead and listed the top pros and cons to consider when it comes to franchising your business.
List of Pros of Franchising
1. Minimize the Risk That Comes With Growth
There is a great deal of risk involved with growing your business to new locations along with the cost associated for mitigating those risks. From doing studies of a potential area to hiring a group to see where a good location for your business may be, this process can take a great deal of time. By franchising your company, you can give this risk to the person opening to franchise.
2. Creates Easy Expansion Capital
When people are interested in opening a franchise of your business, they will be responsible for building up some of the expansion capital required. This is why a franchise is a good model if you are looking to expand cheaply. With their capital and your ideas, you can grow your company at a quicker pace.
3. Talent Comes To You
Instead of having to look for talent, franchising allows for talent to come to you. Those interested in opening and running their own franchise of your company will come to you with their interest, and you can select those you want to run franchised versions of your business.
List of Cons of Franchising
1. Challenges to Innovation
When you own all parts of your business, innovation is remarkably easy. When you own a business that is franchised however, then innovation can be particularly difficult because you do not have broad reaching control over all the aspects of your business.
2. Less Control Over Franchise Managers
With less control over the business comes less control over franchise managers. This can make implementing certain policies very difficult as the franchise manager may not have to listen to what your requests or instructions.
3. A Weak Central Core
The last thing to consider is that by franchising your business, you create a weak central core. It will be a challenge to unite the entire business under a new policy ideal. While franchising can make expansion simple, it will make managing in the long run more challenging.