The other aspect of what franchising enables you to do is to expand geographically, as I mentioned before, with a lower risk profile in areas that you may have not done so before. So if it’s within one location, there’s significantly more risk if things take place that impact on that location and your narrow revenue stream.
When you’re spread throughout multiple geographic locations, you have the ability to spread your risk across all these locations. And what we’ve typically found is that when one location is down after something is impacting in one spot, it’s not impacting on the other areas.
So by doing this, you’re effectively reducing the Risk of your business and the susceptibility to local impacts that might take place.
So an example is in Australia, where my businesses are based, they’re very different marketplaces right across the country. And so typically if one marketplace is strong, you might have another marketplace, which is weak. But this diversification geography through a structured franchise model reduces this type of risk, which is often outside your control. So that’s another aspect of the franchising model that can help you manage and lower the risk of your business.
With the normal expansion framework that you have, often, you need to engage in employing more people. And when you do this, it can if you’re bringing people into your organization, depending on the onboarding and training system that you have, it may take three or four weeks up to a month and a half before these people are actually productive.
This is always the case with the recruitment process itself, and is always challenging and when I talk to business owners, finding the right people is one of the key challenges that really never goes away.
So in relation to risk associated with the employment side of things, you’re significantly reducing that as well. Because your delivery of your product or your service is going to be managed and handled by franchisees. And it’s, it’s quite different.
When you’re bringing franchisees in your business, they have got skin in the game, which means they’ve got money that they put down on the table. And they’ve also trained on their own time. And you know, they’re not just going to be there for three months, four months or five months, because there’s a financial commitment and a contractual relationship for them to operate that business for five years or 10 years or whether you may have structured that.
So this enables you to reduce the risk of scaling and expansion by effectively less reliance on employees in the marketplace.