Franchising Your Business

Franchising as a method of doing business has many of the qualities sought by leading businesses. In fact, many conglomerates have adopted franchising as a means of managing risk.

Advantages for franchising

  • Franchising reduces personnel requirements - each outlet is a self-contained business. The franchisor receives regular reports from the franchisees, and supplies support as required.
  • Franchising is a knowledge-based business - franchising requires businesses to capture their specialist knowledge within franchise manuals. By documenting their specialist knowledge, franchisors have not only defined their intellectual property, but they can also realise its value by licensing the intellectual property to franchisees. 
  • Franchising is a synergistic network of enterprises - franchising allows individuals dispersed over a wide geographical region to pursue common goals. By co-ordinating purchasing, accounting and marketing procedures, franchising allows small businesses to enjoy the benefits normally only realised by large conglomerates.

Franchising offers many advantages over other business systems

  • Growth using other people's capital and time.
  • Freedom to focus on central business processes while the franchisees focus on day-to-day operations 
  • Reduced staff to manage the central business process 
  • Reduced exposure to risk during the expansion phase by having franchisees carry a large proportion of risk associated with opening new outlets. 
  • Ability to penetrate the market rapidly before competitors gain footholds. 
  • Owner-operators consistently out perform managers. 
  • Secured outlets for the franchisor's range of products or services
  • High earning ratio on capital outlay.

Extract taken from the NZ Franchisor Guide 3rd Edition, written for the Franchise Association by Franchize Consultants and published in January 2009.

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