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10 Reasons to Franchise

1. FRANCHISING: The most successful way to grow a business without huge capital investment or financial liability towards leases or personnel. When you franchise your business you create a business model for other entrepreneurs to utilize and grow their own operations without incurring any liability on yourself. This method of growth allows the business model to expand with virtually unlimited amounts of capital, benefiting you as the Franchisor with increased income as each new unit opens.

2. CONTROLS : Manual: A Franchisor's operations manual address operational issues leading to efficiency and customer satisfaction. The operations manual is the bible of the new Franchisee. It details all of the operations procedures that you the Franchisor has developed in you business and allows your Franchisee to progress rapidly and understand business procedures that are proven with your operations.

3. FRANCHISE FEES AND ROYALTIES : A Franchisor is able to charge an initial franchise fee usually between $10,000 to $25,000 when the franchise agreement is signed and an ongoing royalty which normally is 5% to 15% of the franchisee's gross volume. The major income for the Franchisor is the Royalty that each Franchisee pays to you on a weekly or monthly basis.

4. LOW CAPITAL OUTLAY : When a franchise unit is opened, the burden of capital is shifted to the new franchisee. All costs of land, building, improvements, equipment, furniture, furnishings, inventory, supplies and working capital are the responsibility of the franchisee. This is why the amount of capital to expand your business by Franchising is virtually unlimited. Each new Franchisee brings their own assets and credit to your business to expand it so that you have no increased liability or borrowing necessary.

5. SELF-MOTIVATED OPERATORS ( FRANCHISEES ) : As a general rule, an owner / operator is more dedicated than the average corporate employee. When a person operates their own business, with their capital invested and have a direct personal liability for the performance of the business, the potential for success is greatly multiplied.

6. FRANCHISES HAVE LOWER FAILURE RATE : Only 2% to 4% of franchisees of a proven franchise concept fail, whereas 65% of new businesses fail within the first three years of operation. The reason that Franchise are usually more successful is that the Franchisee has access to proven business procedures, developed by the Franchisor, and thereby eliminates many costly errors that cause a non-franchised business to fail.

7. PAYROLL TAXES : Unit employee salary, tax and tax reporting burdens are shifted to the franchisee. The franchisee is an independent contractor and its employees aren't the employees of the franchisor. The Franchisor is not liable for the Franchisees labor costs and receives the Royalty from the gross volume of the operation, no matter what the costs to the Franchisee are.

8. NO DIRECT LIABILITY FOR FRANCHISEE'S ACTIONS : Generally a franchisor is not responsible for the franchisee's actions or those of the employees of the franchisee. By Franchising your business, instead of expanding it yourself, you have transferred the liability to the Franchisee in all aspects of the operations. The Franchisee is solely responsible for their own actions and cannot implicate you as a responsible party since the Franchisee operates under a completely separate corporate structure then the Franchisor.

9. QUICK MARKET PENETRATION : The Franchisor enters into new markets in different states without a large capital expenditure. By Franchising you can expand into markets which would be virtually impossible to develop from your own base of operations by utilizing the Franchisee's localized contacts and understanding of the new markets.

10. FAILURE OF UNITS : If a franchisee fails there is a loss of royalties to the Franchisor, however the loss is not as significant as if it were a company owned store. This loss is only the Royalty that would have been generated for you from the Franchise operation if it had succeeded. Many times it is possible to replace and ineffective Franchisee with a new operator and keep the Royalty from the established business flowing to you the Franchisor.