Franchising your business

Franchising is a relatively flexible format, and just about any type of business can be franchised, provided it's credible, unique, easily explainable and has the potential to provide an adequate return on the investment.

For those small businesses who want to expand, but lack the money, staff or time to do so, then it's probably a good idea to think about franchising because franchising is often the fastest way to grow. That's because it's the franchisee that performs most of the growth tasks. The franchisor provides the guidance, of course, but the franchisee does the legwork. Thus, franchising not only allows the franchisor financial leverage, but it allows him to leverage his resources as well.

Franchising allows companies to expand without the risk of debt or the cost of equity. Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franchisor.

Furthermore, franchising allows entrepreneurs to overcome many of these problems by substituting a motivated franchisee for a unit manager. Interestingly, enough, since the franchisee has both an investment in the unit and a stake in the profits, unit performance will often improve. And since a franchisor's income is based on the franchisee's gross sales and not profitability, monitoring unit level expenses becomes significantly less cumbersome.