Guidant Financial Group Blog

Business Week recently published an article "The Franchising Way to Grow" which discusses some of the pros and cons of turning your small business into a franchise. Many small business owners believe that the best way to expand is to open and run multiple locations themselves, but the business owners in this article have achieved incredibly fast growth and more profits by letting franchisees do some of the work.

Some of the positive points of franchising include:

• The franchisees bring in their own capital in opening the new locations.
• Franchisees are invested in the success of the business, which isn't the case with some managers hired to run new locations without franchising.
• Several franchises can be opened in the time it takes to open one new location without franchising.

The article does point out some of the negatives of franchising, including:

• the initial time investment required to detail and refine operations for a training manual
• the initial monetary investment for preparing the franchise, attorney fees, etc.

Of course, not every business and business owner is a good candidate for franchising; businesses that require specialized knowledge or training and business owners who want to have complete control over their brand may not find what they are looking for in franchising. Simple concepts work better, such as newly launched fast food franchise Orange Tree Hot Dogs, one of the businesses profiled in the article. The existing popularity of the brand and the relative ease of training has made finding enthusiastic and capable partners very easy for the owners. Of course, there are exceptions to this rule, and even the quirkiest businesses can be franchised with the right savvy. An example would be 1-800-AUTOPSY, which was profiled in a NuWire Investor article on franchises for eccentric entrepreneurs. Then again, autopsies and hot dogs both involve formaldehyde and things that died in a questionable fashion, so perhaps the two concepts aren't so different after all.

Business owners who are interested in expanding may find that franchising is an excellent way to test new territories and increase their own profits with less expense and hassle than would be required in opening a new location of their own. Good candidates may want to consider 401(k) Small Business Financing to fund the preparations. And of course on the other side of the transaction, franchisees may want to consider financing their venture with their 401(k) as well.