If you want to expand your successful New Zealand business, franchising may benefit you. For instance, it will allow you to reach new customers and extend your brand. Furthermore, there are more than 631 franchise systems in New Zealand, making New Zealand the most franchised country per capita. If you are hoping to take advantage of this franchising boom, you might wonder about the benefits involved. This article will take you through five benefits of franchising your business.
This publication provides you with the fundamentals for franchising your New Zealand business, including set up, branding and management.
What is Franchising?
Franchising is a business model whereby a business owner (franchisor) allows another person or business (the franchisee) to license their systems and intellectual property in exchange for an upfront fee and ongoing royalty payments.
Rapid Growth
A significant benefit of franchising is that you can grow your business quickly. This is mainly because franchising removes the financial and resource limitations you may encounter when expanding a business by other means.
For example, franchisors can expand without employing new people or incurring direct expenses on things like lease agreements and fit-out. Instead, your franchisees will assist in the expansion, including assisting with:
- the employment of staff;
- managing day-to-day operations of their franchised business;
- entering into the lease agreements; or
- paying the rent on sites and undertaking local marketing.
Reduced Investment
Another critical benefit of franchising is that you can grow your business without any significant sacrifices, such as giving up equity for investment or increasing your debt. In a franchise agreement, the franchisee is often responsible for paying all upfront expenses relating to the business, which requires less financial expenditure for franchisors. Upfront costs might include:
- lease payments;
- fit-out of locations;
- training of staff; and
- even legal fees.
Limited Role in Day-To-Day Operations
Franchising your business allows the franchisee to oversee the day-to-day operations of their franchise. This will enable you to focus on the business’ branding and broader operations without worrying about employing and managing staff or directly overseeing the provision of goods and services.
Franchisees are small business owners who invest their money into buying a franchise. Therefore, they have a significant personal motivation for their business to do well. This motivation, along with a franchisee’s unique insights into their local market, may help build your brand in a more specific way for the benefit of you and your franchisee.
Brand Awareness
Another considerable benefit of branching out your businesses is that it allows you to increase your brand awareness. The more franchisees you have, the more aware the public becomes of your business. This improves the overall popularity of your franchise and should allow more sales and profits.
Some franchisors also have a minimum marketing expenditure requirement for each franchise, which requires franchisees to facilitate their marketing within their local area. As a result, each location promotes the brand and you are using their marketing team to promote the business. This facilitates a large following of loyal customers.
Increased Revenue
Franchising your business is a great way to increase your revenue and overall business value. Franchisees pay upfront costs to join your franchise and ongoing royalty payments for continued use of your branding. Royalty payments are often based on the revenue of your franchisees rather than their profits, which may help you to generate profit. The overall capital value of your business will also grow naturally from franchisee revenue.
Key Takeaways
Franchising your business comes with various benefits that you can take advantage of. For instance, some of the main benefits of franchising your business include:
- rapid growth;
- reduced investment;
- limited role in day-to-day operations;
- brand awareness; and
- increased revenue.
If you need help franchising your business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Franchising is a business model whereby a business owner (franchisor) allows another person or business (the franchisee) to licence their systems and intellectual property in exchange for an upfront fee and ongoing royalty payments.
Some of the main benefits of franchising your business include rapidly growing your business with a low financial investment. Franchising can also increase your revenue and brand awareness without having an increased role in the day-to-day operations of your business.
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