Growing Your Business Through Franchising Vs. Organically

You’ve set up your business and you’re going from strength to strength, but now you want to take that next step. You’re interested in the possibilities that are out there for you and your brand, but you’re not too sure which is the best route to take – to franchise your business or to make it alone?

Well, this blog post will be looking into just that – the opportunities that arise from both franchising and organic business growth, with the hope of helping you and your business on your next venture.

Organic Growth: Company-Owned Expansion

An option you have probably already considered is expanding your business by opening up another branch yourself.

This has one rather obvious yet very big benefit – that you keep 100% of your additional unit’s profits. This differs from if you were to franchise, as these profits would be shared with the franchisee that owns the outlet.

Another benefit of expanding in this way is your control over the units themselves. You will be able to ensure that the business remains on brand and that the employees are reflective of your company’s values etc.

Whilst this sounds very good, it’s important to bear in mind that there are disadvantages that come with taking this route. With increased control also comes increased responsibility. Any issues or complaints from staff and customers will be directed straight to you. This is also the case financially – whilst you can keep 100% of the profits, you’re also responsible for 100% of the losses. This is definitely something to make a note of when considering this route.

Growth Through Franchising: Returns With Little Risk

Unlike company-owned expansion, a franchisee is an independent contractor, and assuming you direct them appropriately, they are ultimately responsible for financing their franchise. Therefore as for your involvement, you put relatively little money into adding each location, but this often leads to high financial returns, with relatively little risk.

Franchisees also remain responsible for costs (such as new décor packages, new equipment to implement new services, etc.). As long as your franchisees are provided with thorough training and gain a good understanding of the brand and its objectives, you can earn high royalties from sales at these outlets.

Therefore franchising is a great means to obtain expansion capital as your franchisees pay to buy outlets in your business. This means you can grow the number of locations without touching your own capital or needing to request financing from banks or investors.

The percentage returns you earn can be many times what you would have earned if you opened and ran the outlets yourself, making franchising a fantastic option for business growth. Not only will your business gain audience awareness and new geographical possibilities, but it’s also done without the extra stress, worry, or demand on your shoulders.

Organic Growth: Joint Ventures

In business, a joint venture is a commercial arrangement between two or more participants who agree to cooperate to achieve a particular objective.

Joint ventures can be a good option as they can lead to business growth without the necessity to borrow funds or source outside investors. It’s also a good way to expand your brand’s reach as you may be able to utilise your partner’s pre-existing database to market your products or vice versa.

However, a major drawback that some will find challenging with a joint venture is managing the relationship itself. It can be extremely difficult to ensure either party is doing enough for the business, and unlike with a franchisee who is obligated to follow the rules that you wish to set out by contract, the joint venture partner has an equal position to you, meaning they are likely to take greater freedoms in their system of operations than a franchisee would.

Growth Through Franchising: Selecting The Talent

Unlike with joint ventures, when you franchise you remain in control of who is a part of the business and whether their desired location is the right fit for the brand. It’s a great way to source talented people that will be an asset to your business and its values.

Also as one of the fundamental incentives for your franchisees will be to run their business in return for profits, you can expect a lot of commitment and hard work from those on board.

Rather than hiring an individual to work or manage locations for you, and paying them a salary (which can cause a lack of incentive by the employee), the ownership and the drive to succeed by a franchisee will lead to a commitment to business growth. This can create a great relationship and sense of community between you and your franchisees as you share the same goals and desires for the business.

Expanding Your Presence Online Organically Vs. Expanding Online Visibility With Franchisees

A really good place to expand your business’s growth organically is by enhancing your brand’s visibility online. Social media is a great place to do this and is an affordable way to grow a small business -provided you use it correctly.

A good place to start is by identifying who you want to target on socials. Once you’ve identified this, you can work out an online-social strategy, noting the social media platforms you want to use, and how you will use them to enhance your business’s presence on these sites.

However, this too has its limitations. Whilst social media can give your business offerings visibility if your services are restricted to a specific area, there’s a whole market you’re missing out on. This is where franchising your business could bring a lot of profitability – you can expand to new areas, grow your presence and make the most out of the market.

The addition of multiple franchisees building platforms can allow for more rapid development. After all with more social accounts for your business, you will become even more visible and be able to target more locations, leading to an increase in custom.

To Summarise…

We’ve provided you with information and suggestions for both organic growth and expansion with franchises for your business. When you source growth organically, you do pick up a risk, which can either make or break your business, whereas franchising can have a big payoff with relatively little risk. Admittedly, franchising isn’t for everyone, and it’s important to really understand the expectations that come with being a franchisor and the alternatives that are on offer. Before making your final decision, we advise researching the areas we’ve included and seeing which suits your business model best. We wish you luck and every success!

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