Why Businesses Choose to Grow Through Franchising

When entrepreneurs want to grow their businesses in a rapid and strategic way, they often utilize one of the corporate world’s most successful models: franchising. But the benefits that come with franchising a business aren’t limited to local business owners. Franchisors are also able to get a leg up on the competition by growing their brands with the help of franchisees.

One of the biggest reasons brands decide to franchise is financial. It’s possible for business owners to grow their concept from one unit to two or even three when they’re on their own. But it’s incredibly difficult to grow that network to 20, 50 or 100 units without raising millions of dollars. It also becomes increasingly challenging for entrepreneurs to manage more locations as they open up their doors for business in new cities and communities. That's where the relationship between a corporate owner and local franchisee comes in.

“Franchisors have the ability to expand their businesses without personally taking on any of the financial burden. Since franchisees use their own capital to launch local units, franchisors have virtually no investment at the unit level. That means they can leverage the assets that their local owners bring to the table instead,” said Rick Robinson, founder and president of Services4Franchising.

Those assets that business owners bring to the table go beyond financial capital. Franchisees also know more about their local market than anyone else. They have strategic insight into where brands should be located, and also have a unique understanding of the consumer base living and working in the area. That means they know which marketing tactics will be see the most success.

Steve Beagelman, president and CEO of SMB Franchise Advisors*, says it’s that elevated marketing approach that separates franchise brands from the smaller business models that lack corporate support.

“Concepts that become franchise chains are able to achieve a heightened level of brand recognition at a much faster rate,” said Beagelman. “Franchises have the ability to build on the momentum that comes with expansion, and appear on billboards, radio shows and TV. That exposure is ultimately what drives a brand forward.”

Once brands are recognized by consumers, they’re able to seamlessly move into new communities from coast to coast. That means they can reach new consumers—and add to their bottom line—faster than other concepts. While independently owned and operated businesses would have to work for years to break ground in a new city, franchises are able to simultaneously hit the ground running in multiple markets.

“When non-franchised businesses want to expand across the country or internationally, they have to save money for years in order to hire employees, create marketing campaigns and secure real estate,” said Robinson. “But when businesses decide to franchise, they’re able to leverage the time and efforts their local owners put in, enabling them to grow at a much faster rate. Franchising gives entrepreneurs the ability to open dozens of locations in one year, which can’t be done by businesses going it alone.”