The pros and cons of creating a new business franchise

creating a new business franchise

The pros and cons of creating a new business franchise

There comes a time in many businesses’ lives where you have to think about the next big step. How do you go from one level of success to another? One option is creating a franchise out of your business, allowing other would-be entrepreneurs to start a new branch of your operation. Franchises are huge contributors to the UK economy. They employ over 600,000 people in the UK and contribute £15 billion to our economy.

While things might be at a standstill at the moment, you can still prepare for the next step in your business journey. But is franchising the right next step for you? Let’s look at the pros and cons of creating a new business franchise.

Pros

From extra freedom to shifting costs, here are just a handful of pros of franchising:

Grow your business rapidly – By creating a franchise out of your business, you can expand at a much quicker pace. Instead of having to open branches yourself, you entrust that to someone else. That means several could potentially open at once. Even better, they don’t require you to spend your time doing it.

Cost effective – The costs of starting a new branch fall on the franchisee. If they’re looking to set out with their own business, they should be a hungry individual who’s ready to take on those costs to get their branch off the ground. And while you don’t have to spend money to set it up, you still earn money from their franchise fees and royalties. Over half of UK franchisees report an average annual turnover of £250,000, and plenty of that will go to you.

Easier management – Once the new site is up and running, your input is minimal. The day-to-day operations are handled by the owner, meaning you can trust them to get on with it and deliver results. And while they’re working hard to make a success of their business, they’re building your brand further.

Cons

Never forget this is a big decision. There are downsides to creating a franchise:

It’s risky – You are putting your reputation in someone else’s hands. If something goes wrong, it reflects badly on not just them, but your entire franchise. This domino effect can hurt all of your locations. You have to be sure any new franchisee is a good fit for your brand.

Higher upfront costs – While it might be more cost-effective in the long run, you have to invest a lot of money upfront to establish the franchise. This will involve myriad legal documents, not to mention any brand documents you need for every new branch. What about training materials? Or posters and other graphics?

Training and support – You save time by not having to overlook every minor detail, but your scope of work widens immensely. Suddenly, you’ll find yourself dealing with larger tasks such as management training and support. You want each franchisee to be its best, so be prepared to put in the hard work to ensure they have what they need.

If you were hoping for an easy answer to what you should do, sorry we can’t provide it. But we hope this has given you plenty to think about when it comes to the future of your business. It might not be today, and it might not be tomorrow. But at some point, creating a new business franchise could be what you need to do.

At Big Hand, we’re always here to help every business, from the big franchise owner to the newest franchisee. If you have any questions, reach out to us on 0161 327 2911.

About the Author:

Since 2013, Sophie has been an integral part of the Big Hand team. As a social butterfly, Sophie is mostly responsible for introducing new clients to the company. If you’re an avid networking, you’re most likely to meet Sophie at local events. Alongside attracting new business, she also assists with account management, and she manages payroll on behalf of clients. For fun, Sophie loves to keep fit running or playing korfball with her team. She is also in the middle of learning a new language and so her most recent challenge is attempting to read Harry Potter in Dutch.