When your local business grows in a certain area, there will be a point that it stops growing because of the market saturation. You get most of the customers from that area and then it becomes difficult to gain more profit from the sale area. But the urge to take your business one step further remains there.
In such a situation, you might start thinking about creating a new branch of your business in another city or in another area of the same city. In this way, it will provide you more benefits as you are using your established brand name and a new branch will become popular in the new area because of the value of your brand’s name.
But it will become difficult for you to manage both branches, especially when you need to operate multiple branches, things will become more difficult. For a certain amount of branches, it is a good way to grow your business. But a point will come that you would not be able to operate more branches.
What to do in such a situation? Would you like to put a full stop to your business growth or would you still like to grow? Obviously, you would love to grow. For such a situation making a franchise instead of a branch is a perfect option.
A franchise is just like a new branch for the customers, but for the owner of the business, it is totally different thing. The concept of the franchise is not new to the world, with this business model, you can make more money by selling only the brand name of your business. The franchise owner will take care of all the things and you will get the profit as the business owner.
The franchisor (business owner) will sell the brand name to a new party and will get a yearly fee for that. The business owner, who is known as a franchisor in this model, will sell a license to a new businessman to use his brand name.
The franchisor will make an agreement which could have multiple points. But the most important thing in the agreement should be the quality of the service. The franchisor makes it sure that they have full rights to inspect the operations and services provided by the new franchise so that the quality of business remains the same.
If any franchise is not maintaining the quality of service, it could affect the actual business owner because that franchise is using the brand name. So franchisor should make it sure that new franchise maintains the standards but they don’t need to operate the new “branch” or “franchise” themselves.
For a big business, making a new franchise is not a simple procedure. It is a complex process which involves many legal and operational aspects. So if you are planning to make new Franchises of your business then you should consult with an expert who provides the legal aid and also knows the complexity of this business model.