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Advantages of franchising

CAPITAL

Franchisees inject their own capital into the business, which allow franchisors to leverage on the assets of franchisees at essentially zero cost.

RETURN ON INVESTMENT

Due to the low cost of investment, the returns on investment from franchising is significantly higher than other investments.

RISK REDUCTION

Financial risk to the franchisor is essentially non-existent due to the nature of which franchise systems work. Whereby no capital is invested by the franchisor.

LIMITED LIABILTIY

The franchisor will not be signing leases, taking on financing, etc., and will thus expand with limited contingent liability.

SPEED OF GROWTH

Franchisors will be able to exponentially grow their business without the needs of injecting capital by leveraging on the resources of franchisees.

REDUCED OPERATIONS

Franchisors will pass the role of daily operations to franchisees while they focus on the management of improving performance of franchisee units at a strategic level.

QUALITY CONTROL

Franchisee owner-operators will have the incentive to ensure quality of the unit and business they are operating is in top condition and will actively promote their franchise units as compared to unit managers.

MOTIVATION

Franchising provides companies with highly motivated unit managers through owner-operators who will come treat the business as their own.

INCREASED PERFORMANCE

Units that are franchised generally run better than others non-franchise units. This is reflected in the fact that franchised stores typically outperform franchisor-owned stores in terms of sales volume.

LEAN STRUCTURE

Franchisors grow their business without the need of increasing overhead costs.

BRAND BUILDING

The brand of the organisation grows with each additional franchisee, as the retail presence grows, so does the size of the franchise brand.

ADVERTISING

Franchisees will more often than not, contribute to marketing and advertising efforts set in place by the franchisor and even contribute to a common advertising and promotional fund which allows for the promotion of the brand under the direction of the franchisor.

INTERNATIONAL GROWTH

Franchising allows for ease of international expansion, through the use of local partners with knowledge over the terrain.

Franchising brings about a low-risk, low-cost form of expansion.