To Franchise or Not to Franchise? That is the Question

After starting and running a successful business, you may want to start expanding so you can increase profits even more and continue to grow exponentially. In many situations, franchising can be a great opportunity, but it is not without its risks. Before making any decisions, business owners should have a strong understanding of the main pros and cons of franchising. Please don’t hesitate to contact us at (253) 720-3020 for any questions you may have after going over the basics covered in this blog!

Benefits of Franchising

Franchising a business is a proven way to grow and expand. Some of the best-known companies in the world thrive on the franchising model. The following are some of the most significant benefits you will enjoy by franchising your business.

  • Limited Capital Required – When you bring on a new franchise owner, they will have to put up most, or even all, of the capital required to get up and running. This means you don’t need to have huge sums of capital available every time you want to expand.
  • Expand Much More Quickly – When opening new locations yourself, you are responsible for everything that needs to be done, which takes a lot of time and money away from you overseeing the rest of your business. Once you have a franchise system in place, on the other hand, expanding can occur as quickly as new franchise owners can be brought on board.
  • Reduced Risk – The overall risk to you is dramatically reduced because the risks of that franchise are passed on to the franchise owners.
  • Brand Control – Franchisees are purchasing your proven brand for a reason-it works.  You retain control over the marketing and overall image of the company while the franchisee handles the day to day of their franchise.

Problems with Franchising

Of course, there are also some concerns that you need to be aware of before creating a franchising program. These potential problems can be significant, and franchising isn’t right for every situation.

  • Loss of Control – While you will certainly retain a significant amount of control over how the franchise locations are run, you aren’t the direct owner. For some people, giving up direct control over things like hiring employees can prove difficult.
  • Lower Innovation – One of the perks of franchising is that you’re focused on a proven method. The downside to this, however, is that it can stifle innovation. Doing things because they work can be good, but often at the expense of finding better solutions to problems.
  • Reduced Profit Per Location – A franchise owner will receive the bulk of the profits from the locations they operate. If you expanded by opening locations yourself, this profit would go to your pocket. Of course, this can be offset by the benefit of being able to have more locations open more quickly.

Get Legal Advice

If you decide that franchising is right for you, or even if you would just like the advice of a neutral third party, APH Law is here for you. We can look over your business model, and provide insights regarding the potential pros and cons of franchising based on our years of experience. If you choose to franchise, we can also handle all the legal aspects of this often-complicated process. Contact APH Law to schedule a consultation today!

Written by APH Law PLLC

APH Law PLLC

When we founded APH Law PLLC in 2010, we did so out of a desire to connect business owners with more and better opportunities. No matter what industry you’re operating in, creating a strong foundation, preparing for the future, and protecting against challenges are key to long-term success. It is this kind of support that we take tremendous pride in helping businesses.