A growing number of people who want to set up their own business prefer franchising. They believe this is more sustainable and less stressful as they don’t have to brainstorm about a name and what to offer to consumers among other factors.
Franchising continues to gain popularity in the different parts of the world. In the U.S. alone, an estimated 3,000 franchise business companies are operating today. In addition, more than 900,000 franchise businesses belonging to 300 different categories provide almost 18 million jobs to Americans.
Major Benefits of Franchising
Basically, franchising has several major advantages to franchisors and their franchisees particularly those who want to start a small business with minimum capital.
Access to talented people is one of the major advantages for owners of franchise companies. This is because franchisors or those who own franchise or parent companies have an opportunity to easily find talented people to manage their locations. Experts have pointed out that the most hardworking people normally choose to invest in running a business and earn profits rather than be employed and earn a salary. And by having franchisees, there’s a potential to get people willing to work hard to build the business onward.
The availability of capital for expansion is another benefit. As franchisees pay to buy outlets in a chain, franchisors can grow their locations without having to loan capital from banks or use their own capital or that of their investors.
On the part of franchisees, they have an opportunity to start an already established business. They no longer have to think of a name and the products or services to offer as everything including signages, flyers and other equipment are provided for. They can also avail of free marketing for their outlet and free training of their staff. In short, they can run an independent business and may get their return on investment in a shorter time.
Franchising also has low growth risk unlike other types of businesses. For franchisors, they can earn high financial returns specifically high royalties from sales of their outlets with little risk. According to experts, the percentage returns they can earn will be much higher than what they would have earned if they operate their outlets themselves.
How to Choose the Right Franchise
With the numerous franchise businesses available today, it can be tough to choose which one to invest in. It would be best to start by determining your interests and your passion. Ask yourself about your personal goals, what you would like to offer consumers and whether you want to keep up with the trend. This way, you will know which direction to take.
Next, decide which role you want to play in your business. Choose from being an owner/operator or an absentee owner. An operator is very hands one and one directly involved in running the franchise while an absentee owner hires a staff to manage the business.
Finally, determine your budget and find out the costs involved such as the franchise fees and overhead costs among others. A food franchise, for example, requires a higher capital because of the needed equipment and inventory. necessary compared to a home-based business-to-business franchise.