When successful business owners want to increase their reach, they often move to open new branches in different locations to help attract a new group of customers. For some, self-managing a few facilities is a preferred way to go, but others may want to explore the franchising route.
Why franchise a business?
Franchising can be great for the growth of a company. Opening up franchises allows the business to grow more rapidly, as there are more people on board to help run operations. It also has a lower risk for the business owner, because there is less of his own money being invested in these new facilities.
According to Entrepreneur, franchising can also give business owners access to more and better talent . By allowing people to buy in and run their own branch it gives them more incentive to make it thrive rather than simply hiring managers to work for someone else with no real ties to the business.
"Business owners may need to hire new accountants or legal experts."
Steps to consider before opting to franchise
There can be challenges to operating a success franchise, however. Inc. warns that before choosing to franchise, a business owner should carefully consider if the move is a good choice for his company. There are legal steps to take, for example, that some business owners may not want to tangle with.
Tax forms can be complicated and business owners may need to hire new accountants or legal experts to help get the proper paperwork in order, as well as franchising consultants to make sure that none of these critical steps are missed. Paperwork will need to be filed with the Federal Trade Commission and the business will have to be registered as a franchise. It's possible, but can be very difficult, for a business owner to navigate these legalities alone.
The rules and regulations for these businesses will also vary from the federal to state level, and from state to state as well. Franchisers looking to set up shop across a state border will have even more legal provisions to understand and comply with.
Before starting a franchise, companies also need to be prepared to sink a lot of time and money into this venture, and they should be sure that their finances will be able to handle it. It can cost tens of thousands of dollars, even more than $100,000, to turn a business into a franchise. Being sure that the business has the staying power to thrive in multiple locations is important before investing all of these resources into the project.
Equipment and franchise industry piece brought to you by Marlin Equipment Finance, a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin's equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers in the security, food services, healthcare, information technology, office technology and telecommunications sectors.