Notwithstanding the fact that there are problems to overcome, franchising can often be the best business approach. For the franchisor, it could mean putting a successful business at risk. It can require substantial capital investment and an even greater investment of time and human resources. New skills must be acquired and new duties and responsibilities assumed. The new system may lose money for years during the maturation stages. Absolute control over every aspect of the operations must be released, which can be unnerving, at best.
For the franchisee, it can be a frustrating search for the one right opportunity. If a young system is chosen, the risks can be even greater than starting an independent business. Tight control at one extreme, or being cut adrift to sink or swim on one's own abilities on the other, can lead to major disappointments and unhappiness. It can be extremely unsettling to be too dependent on the actions of others. A substantial effort is often required to acquire new skills and adjust to a new work environment. So, why is franchising so popular and continuing to grow at such an incredible rate?
The Franchisor's Story
Once the initial growing pains have been endured, there are substantial rewards for the business that chooses to expand through franchising. It is an expansion alternative which requires, in the final analysis, less capital, because the franchisees finance their own outlets.
A successful franchisor can direct a much larger and more complex business network with fewer employees than would be the case with the same business operated as a corporate owned chain. This also provides a better return on capital, overall, in most cases, notwithstanding the fact that an individual corporate owned store is more profitable for the franchisor than a franchised store.
Franchising also permits a more rapid expansion through a selected market. This results from the combined effect of the more motivated owner managers, the use of the franchisee's capital and the standardization of construction and business systems.