The positives and negatives of turning into a franchise

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As an experienced and highly successful independent business owner, the idea of converting your business into a franchise requires you to weigh up the pros and cons:

  1. Benefits of being a franchisor

Access to ready-to-operate locations

You don’t have to recruit franchisees from scratch when starting a franchise system. Established business owners might be looking for to be part of a system, so this gives you an opportunity to work with like-minded entrepreneurs from the outset.

When converting independents into franchisees, you have the advantage of working with entrepreneurs who already have premises, staff and customers. They have key boxes checked for becoming a fully-operational unit within your franchise chain.

Increased profitability

As an independent retailer, you’re probably buying in bulk. But the bulk you’re used to is nowhere near the levels of bulk that franchisors have to deal with. The advantage here is that your purchasing power improves, amassing savings for you and your franchisees.

It’s important to talk to your current suppliers to see if they can accommodate your increase in orders. You might find that your current suppliers are confident in supplying you as an independent business, but they might not have the capacity to supply a franchise chain. If you succeed in your negotiations with suppliers, you could drive up profitability to levels that could not be reached as an independent operator.

  1. Challenges of being a franchisor

Managing experienced business owners

As mentioned earlier, converting existing businesses into new franchise locations can be a genuine benefit for new franchise outlets. Domino’s Pizza chain is experiencing success in terms of growing its footprint in South Africa, for example, simply by converting de-commissioned Scooters outlets into new shops.

Franchise experts, however, caution independent business leaders that franchisees who have prior experience in your industry may have their own methods of operation. They could clash with your own newly-developed systems and processes and trying to convince them to change old habits could be a challenge.

Are you prepared to give up operational flexibility?

As a franchisor you now have to answer to an entire network of shop owners before taking major branding or operational decisions, because these decisions will affect people other than yourself.

Source: Standard Bank BizConnect – https://bizconnect.standardbank.co.za

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