The top 5 reasons to franchise your business

 
Jan. 5, 2012 | by Harold Kestenbaum

If you are an entrepreneur and you have one, two or even three operations, why should you be thinking about franchising? There are many reasons, but here are the top 5:

  1. I have a brand that I want to expand but lack the capital to do it by myself. Franchising provides you with the vehicle to expand using the capital of others, your franchisees.
  2. I want to expand rapidly. Franchising provides you with the ability to grow faster than if you opened units on your own.
  3. I don’t have the human resources to open units on my own. As a franchisor, that is not your responsibility, it is the franchisee who has to staff each location, not the franchisor.
  4. There is a great deal of competition in my “space” and I need to move my brand out. Franchising will provide the speed to market necessary to join the space and be competitive in your marketplace.
  5. I need an exit strategy, how can I sell my company with only a few company owned units? Franchisors have a open path to exit by selling the company or even going public, whereas a small company owned system does not have this capability.

Franchising provides the vehicle to accomplish all of the five items above. In my book, "So You Want To Franchise Your Business," I go into greater detail on what the components of a franchise program are. It starts with the legal documents, like the disclosure document and the agreements; it includes a financial statement of the franchising company, a detailed operations manual and marketing materials, including a website that contains a section devoted to franchising.

The negatives to franchising your business are few and are outweighed by the overall benefits of what can be accomplished with the franchise model. While there are costs associated with putting together a franchise program, these costs are minimal in the grand scheme of growing a brand into a national chain.


Topics: Business Strategy and Profitability , Franchising & Growth


Harold Kestenbaum / Harold L. Kestenbaum is an attorney who has specialized in franchise law and other matters relating to franchising since 1977. He is a partner with the national law firm, Gordon & Rees, LLP and is engaged exclusively in the practice of franchise distribution and licensing law, representing exclusively franchisors, both start-up and established. He is a member of the Gordon & Rees Franchise, Distribution and Hospitality Practice Group.
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