Advantages of being a franchisor
Franchising as a business format, has worked wonders for the franchisee as well as the franchisor. It is in fact a format which thrives on mutual benefit and synergy. Benefits for the franchisee are quite well known like using an already established business model, the right to use an established brand name and all its intellectual property. But why does a franchisor franchise his business? What are the benefits in store for him? We tell you the advantages of franchising for the franchisor.
• Capital Franchising provides the franchisor with the perfect opportunity to raise capital. The franchisor obtains capital from the initial franchise fee paid by the franchisor. This money can then be used by the franchisor to finance and grow his business.
• Infrastructure Also through all the finance raised, the franchisor can put in the money to generate infrastructure. Infrastructure plays a major role in the development of the business by increasing efficiency and creating goodwill.
• Leverage the brand Franchising provides the franchisor with an opportunity to leverage the brand. By adding more outlets and getting in more people, the franchisor can reach out to a great target audience which in turn will help him leverage his brand better. This provides the franchisor with an opportunity to reap rewards for all his hard work.
• Expand Also franchising provides the franchisor an opportunity to expand his business. He can take his brand across boundaries through franchising. Many franchisors franchise stores across the world without even seeing the location once.
• Economies of Scale More and more franchisees means the franchisor can get economies of scale. As the production goes up, the cost decreases which in turn increases margins. Since the franchisor will order for raw materials in bulk, he can get maximum discounts. So franchising provides the franchisor a great oppurtunity to obtain economies of scale.
• Customer insight Also, the franchisees help in providing the franchisor with great customer insights since they are in direct contact with them. The franchisees interact with the customer on a daily basis and hence this can provide some great insights which the franchisor wouldn’t get otherwise.
• No day-to-day running A franchisor doesn’t need to monitor the day-to-day running of the business. Once a franchisor has established and put systems and processes in place, the business is run by the franchisees. Hence franchising involves a lot of strategy rather than daily running of the business.