Franchising Advices

What Is in It for the Franchisor?

The franchisor started out with one outlet. In time, he/she made it profitable, saw a return on his/her investment and secure in that knowledge, decided to open a second outlet. In order to open up a third, he/she had to go through it all again and that would have taken two or three more years. So far growing pains came with finding enough capital to develop the business and with the length of time necessary to make it work. But even if he/she managed to grow quickly enough, the budding franchisor soon encounters a new problem – how to motivate and control the managers and employees of his outlets.

By now the franchisor will have realized that he/she has a working business model which can develop faster and with less investment if finance and management are passed on to someone else – the franchisee. This way the managers of each new outlet are far better motivated to succeed, because they are in charge of their own enterprise and their income is 110 percent tied up with results. With this system the franchise owner can focus on developing the brand and new goods and services. Why 110 percent? Because if he/she is not active or enterprising enough, the franchisor will lose money constantly through rent and salary outlays, for example.