One of the most difficult and costly aspects of starting a business and increasing the business’s market share is branding. When you start a new franchise, the business already has the benefit of coming complete with a brand image, reputation and relevant intellectual property that supports and identifies the brand. The products or services sold by the brand have already been tested and fit to consumers’ tastes and preferences.
For the new business owner of the franchise, the business comes with substantial assistance from the parent company, or the franchisor. This includes assistance in identifying a site, signing a lease agreement, doing construction and design, training, and marketing and gaining financial assistance. Rather than having to hire an individual with expertise in all these areas or attempt to do it on his own without any experience, the business owner is supplied with experts in each field to guide him in making the best decisions based on the business model and the specific location or region in which the business is operating. Less experience, education and training are necessary for the new business owner than would be required if he were to open a business on his own.
The franchisor benefits greatly from franchising their brand and products, as they are able to experience the benefits of growing the business and brand without the risks associated. The franchisee is responsible for qualifying for financing for land, inventory and a physical facility while the parent company only contributes costs for training and administrative details, leaving them with less investment in the business. The franchisor is able to benefit from the growth of the business at a faster pace than they would be able to produce on their own, without taking on this risk. At the same time, the franchisee is taking on less risk as a small-business owner than she would with a new concept, product or service.