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Benefits to Enter the World of Franchising The primary advantages for various companies which enter the realm of franchising would include capital, speed of growth, motivated management as well as risk reduction but there are many other things as well. The very common barrier to expansion that is faced by the small businesses today is the lack of access to the capital. Prior to the credit-tightening of 2008 to 2009 and also the new normal which ensued, the entrepreneurs usually found that the different growth goals outstripped the ability to fund them. Franchising an option of capital acquisition and this would provide other advantages. The primary reason why so many entrepreneurs turn to franchising is the fact that such would permit them to expand without such risk of cost equity or debt. The franchisee would provide the capital needed to open as well as operate a unit and this is going to allow the company to grow by using resources and many more. By using the money of other people, the franchisor may grow hugely unfettered by debt. Also, because the franchisee is the one to sign the lease and commit to different contracts, franchising would allow for expansion with no contingent liability. This would minimize the risk to the franchisor. This means that as the franchisor, you don’t just require less capital in which to expand but the risk is actually limited to the capital which you invest in developing the franchise company. This is one amount that is usually less than the cost of opening a different company-owned location.
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You can also have a benefit of motivated management which is also an advantage. Know that another stumbling block that face many entrepreneurs who want to expand is finding and also retaining the good unit managers. Usually, the business owner would spend several months looking and training a new manager and only see them leave after or get hired by a competitor. The hired managers are employees who may have such commitment to their work that makes supervising the work from a distance a big challenge.
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But, franchising would permit the business owner to overcome the issues by substituting the owner for a manager. There is no person who is more motivated than someone who is invested materially in the success of the operation. The franchisee is the owner and one’s life’s savings is being invested in the business. The compensation will come largely through profits. The combination of these factors will have different great effects on the unit level performance. Through franchising, the franchisor can function in an effective way with a leaner organization. Since franchises are going to assume different responsibilities which are shouldered by the corporate home office, then the franchisors can leverage the effort to minimize overall staffing.