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Get the Edge on Competition
Customers are often attracted to a new idea and will stay with a brand if the product or service is as good as, or better than that supplied by their previous provider. By quickly expanding into new geographical areas, you are well placed - as long as your product or service is good enough - to hijack your competitors' customers, and retain them.
Effective Quality Controls
Franchising is all about following a system. As all your franchisees are following the same system, customers throughout the network should receive the same high quality service, irrespective of location. They will always know what to expect from your brand, and that encourages loyalty.
Rationalizes Management
Running a franchise system requires less management than a company owned chain of outlets, since hiring, training, motivating and retaining competent staff are all functions handled by the franchisee, not the franchisor. It means you can get a better edge on competitors unable to operate with a compact management base, and who therefore need to spend more on this element.
Local Knowledge from Franchisees
Expanding you business into new areas requires thorough research. Expansion through franchising passes the main responsibility for evaluating a new territory on to the franchisee, which probably already possesses a great deal of valuable local knowledge. This is especially attractive when expanding a business into foreign markets. By using indigenous franchisees, you can tap into local business knowledge, which you may otherwise have been unable to obtain.
Group Purchasing Strength
Centralized buying allows your entire network to benefit from volume discounts that an independent trader would be unable to obtain. As a result, your franchised branches will be in a better position to offer much more competitive prices, which will help to increase your market share.
A Dedicated Distribution Network
If you are a manufacturer or service provider, establishing the sales function of your business as a franchise operation provides you with a distribution network entirely focused on the supply of your product or service to customers.
Marketing Power
As your network develops, all your outlets can benefit from the group's marketing initiatives, both at a national and regional level. A positive network spirit will encourage franchisees to help one another through referrals as your customers become increasingly familiar with your brand, expanding on a national level.
Improved Profitability
The return on investment can be higher for a business that expands through franchising. Because there is less capital employed, the franchisors profits are generated on a much lower capital investment. Although the revenue received from franchised units is logically less than that from 100% company-owned outlets, a higher percentage of the revenue is actual profit.
There are definite advantages of expanding a business through franchising but there are certain criteria to consider before embarking on the franchise route. Prospective franchisors must be ready to invest time, effort and money into the correct development of their franchise system. With the right help and guidance, your chances of success are greatly improved - that's why you must always consult franchise experts from the start.
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