Many small to mid-sized businesses seeking to scale and grow their business turn to franchising. According to the International Franchise Association, franchising is defined as: “a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.”

Franchising is often considered when a business is unwilling to take on the cost and complexity of recruiting more headcount and opening new offices or storefronts. This is especially so when the business is unable to support customer demand in a location efficiently and cost-effectively. Setting up franchises in those locations means that the franchisees take on the cost, labour, and sales to meet demand.

Franchising also allows a business to standardise and make its operations consistent across a variety of locations, usually resulting in efficiency and regular quality levels. Examples include global coffee chains or fast-food operators who are able to deliver the same products, service, and experience regardless of location.

The model is not without its disadvantages, however. Set up and establishment of consistency may take time and cost, in training franchisees, for example. Mistakes or wrong actions of one franchisee could ruin the reputation of the entire operation quickly. Friction may also develop between franchisor and franchisee due to excessive monitoring or reporting requirements, too.

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