With different available routes to expanding your business, you might be thinking, “which path should I take?” Well, it depends on what you are expecting out of your growth, and how far you want to take your brand. When it comes down to the choice between growing organically or through franchising, there are some key points to consider.
Expanding your business can be a costly and time-consuming process. Just finding the right location at the right price can be a headache. To grow a business, an entrepreneur must have time to invest in this challenging search. Once the location is found, large amounts of money are needed to pay for the deposit and lease, store build-out, equipment and products needed to run the business.
While growing organically means you get to keep all the profits, it also means you get to foot the bill for all of this. Not to mention the tremendous amount of time and energy consumed in the process while still overseeing the operations at current locations (props to all business people who have grown this way!). Unless a well-trusted team and plenty of investors (or loans) are involved, this generally means one must expand at a slower rate since one person can only do so much.
In the franchise growth model, investors (franchisees) pay all the costs associated with each new location. What is in it for those who invest in a franchise? Franchisees get the rights to a turn-key business, with an easy to follow plan to guide the way. Everything is meticulously put into place; location requirements are set and expert realtors are ready to help; architects already have a plan to expedite; vendors are secured. As a result, a franchisee can have a new store up and running much faster and with less guesswork.
There are geographic boundaries to consider when expanding your business. What areas do you desire to expand into? How far do you want your brand to reach?
Organic growth often limits expansion to areas somewhat near the flagship location. This limited growth may be desirable for those looking to keep it local. But if you want to reach a broader market, franchising may be a better option. Once your brand is ready to launch, franchisees can open a franchise just about anywhere. This allows for greater brand recognition and larger scale expansion, often reaching a national or even global market.
Those expanding their business organically tend to get caught up in the daily hustle of opening a new store while tending to the needs of the already in operation location. Often much-needed processes are vaguely defined and sometimes just get put on the shelf. With a well-rounded franchise consultant and some dedication to detail, franchisors can protect their brand while providing clear instruction on daily operations and well-defined HR practices. All this is often overlooked by the daily hustle of organic growth, which can expose business owners to possible legal issues.
To grow organically one must hire and train a store manager and staff for each location. Training staff (and management) is not as easy as it sounds if you are expecting uniformity in each location. This will stretch your budget and time (and patience!) even thinner. With franchising, the franchisees often are owner-operators, eliminating the need to hire and train General Managers. The franchisees are incentivized to make a profit and turn their investment into success, inspiring more effort and eagerness to follow proven methods of operation. Franchisors provide training guides and mentoring to the franchisees, allowing for consistent training in all locations. The franchisees, in turn, provide and pay for the training.
Some entrepreneurs prefer organic growth. There are advantages to this style of growth, most importantly keeping all the profits! However, it ultimately requires a great deal of capital and time. The rate at which one may grow as well as the market reached, may be limited. Franchising may not be appealing to some, and others may think it is not a viable path to growth. However, if you are looking to expand at a faster rate and into a broader market, franchising can be a well-paved path for expansion.