Franchising is a business expansion strategy that dominates the market. Companies such as McDonald’s, Toni & Guy, Clarks Shoes, and many other giants have done this in a very successful manner. However, it is important to consider all factors before you decide whether franchising is a suitable move for your business. By definition, franchising is a method of distributing products or services with the involvement of a franchisor (who establishes the brand’s trade name and business system) and a franchisee (who pays a royalty for the right to carry out business under the franchisor’s name).
Is there a right time?
There are many instances in which the need to franchise your business may arise. It can most certainly occur when your business has proven itself as successful, in more ways than one. This could mean it is profitable or replicable, for example. If your business is successful, third-party operators (franchisers) could contribute toward further-escalating that success. Alternatively, you will likely know when your business is not ready for the franchising route, as it is not a solution for a business facing difficulty in running.
Advantages & Disadvantages:
+Franchising can enable business growth with a lowered risk. It can certainly lead to increased recognition, as expansion spreads awareness of your company.
+ Franchisees will likely remain consistent and motivated due to the investment which they have put in. They directly benefit from putting work into the business.
– This is a commitment that requires a large upfront investment. The recruitment process may also be much slower as opposed to employee recruitment. It is a task that requires the investment of time.
– The failure of one franchisee can ruin the reputation of the whole franchise. Be sure to choose wisely.
Further factors to consider:
One of the most crucial aspects for consideration is that you have securely acquired a registered trade mark, or at the least, a registrable one. However, even if you have already successfully registered your mark, there always arises the possibility of competitive businesses that may hold a similar mark to that of your own. Turning a blind eye to the importance of intellectual property is a big mistake. For example, if the franchisee faces a similar mark in their field, it could hinder their reputation, customer loyalty, and profits, thus impacting the franchisor. Further, if you do not register a trade mark, the franchisee could unknowingly infringe on another brand’s mark. This unintentional error will expose you to a legal dispute, costing you time and money.
If you have any queries regarding the above article or would require assistance with an alternative matter, please do not hesitate to get in touch with a member of our legal team at Lawdit today.
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