Franchising is an approach that is all about Scaling. There are plenty of examples of businesses that have scaled significantly as a result of having utilised the Franchising model. Many of these are now household names.
So why should you consider this?
Successful scaling requires growing and expansion across all aspects of your business to ensure that the growth does not deliver negative impacts. Sales, Finance, Systems, People, and Processes must all evolve as part of the scaling of a business. Without this, there is the cycle of expansion and contraction as businesses attempt to scale, the weak link breaks and then contraction takes place. To ensure sustainable scaling, which is the ideal way to scale, it is essential to ensure all components can handle the increase in production and service delivery.
Many business owners make the assumption that scaling and more revenue will lead to more profits. This is a fundamental belief that is just accepted and this is probably one of the reasons why so many businesses as they scale become less profitable and place stress on their cash flow. The key is to have a business model which is predictable and one in which scaling delivers additional cash flow and profits at any point of the scaling process.
In a Franchise model, the foundation is a system that can be scaled x 10, x 100, x 1000, and beyond. The more connected expenses and outward flowing cash are linked to income and inflowing cash flow – ideally as a fixed percentage – the more predictable and controllable the margins and profit will be. Franchising is just that. Franchisees as independent business owners only generate income for themselves when they deliver and produce. This is the opposite of having employees in the production part of your business.
This leads to having a scaling model with less dependency on employees which I have discussed previously. This is my preferred approach when scaling a business.
Take some time to consider your scaling plans and ideas. If your business can expand across all the necessary areas and if franchising might be a part of your future expansion.