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How does Franchising helps business grow?

February 1, 2019

 

Franchising has created another pathway for businesses all over the world. According to the statistics, Franchising is having a growth of around 30% annually around the globe and in India, it is known to be the second, fastest growing industry. What is Franchising? Franchising is a form of licensed agreement that allows the owners to sell the rights of the business name or logo to a third party retail outlets, that are owned by independent third party operators. It has emerged to be one of the popular forms of business and marketing. There are basically three types of franchising in business. 

 

What are the three types of Franchising?

  • Business Format Franchising- In this, the company has an established brand name, and the third party helps in the expansion of the business by operating it. Example: Mc Donald’s or Dominos. 

  • Product Franchising- This type of franchising is used by individuals who are good in a particular field, either service or product. It uses an established brand name of a company to retain their position in the industry and gain profit. 

  • Manufacture Franchising- Manufacture franchising allows a third party to take a franchisee from the brand owners and manufacture products under their brand name. Example: Coca- cola or Pepsico

 

Benefits of Franchising in Business Growth

  • Promotes Growth- Franchising backs up your innovative ideas and franchising is a prominent and effective way to capture a market leadership position against the competitors. The third party (franchisee) need not invest in new premises or staff and extra sales will increase profit. 

  • Cost Effective- The scariest thing about running a company is taking loans and suppressing on debts. Franchising reduces the risks of debt or cost of equity. The franchisor provides the cost of opening an unit and helps the company to grow independently. 

  • A steady motivated management- To operate an enterprise, a company needs to recruit managers and heads to lead the other staff. They also need to be trained for a period  to be made aware about the company and its functioning. This needs a lot of time and money. Even then, you are not sure about their loyalty towards the company. While a manager may or may not be dedicated towards his/her work, a person who has invested money in his or her business would definitely want its business to be successful and grow with time. 

  • Brand Development- Franchising is a great way of developing your brand image. The brand will emerge as a well-known brand with the publicity and then its shares profit with the franchisee as capital investment.

  • Secure and steady- A large brand or establishment is secure and steady. So you can rely on the foundation and carry your work with ease. You can access those profits at ease and make business purchases, like office equipments, vehicles etc. 

  • New and innovative ideas- You can have fresh, new ideas that you can propagate through franchising. The future success of the company depends on how well you nurture the idea and put it to use.       

 

A combination of all these would reduce risk and make your company in leaps and bounds. 

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