When it’s time to expand and grow your business, you may consider turning your company into a franchise. If you go down this route, it’s highly common to refer to your franchises as chains. However, a franchise and a chain are two different things entirely. Both are methods of expanding a business, but how do they differ - and which one is the best choice for you?
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Franchising
Franchising is the act of expanding your business by getting other parties to open up franchises in different locations. You are the sole owner of your business and the business idea, but you sell the rights to the brand and business model to other individuals. From here, they can choose to open up a franchise of your business in a new location and run it themselves. They will use their own money to invest in the franchise, and they are responsible for ensuring it’s successful.
In modern times, there are loads of examples of franchises. Just look at sites like Franchise Direct, and you will come across loads of established companies selling franchise opportunities. It’s a chance for businesses to grow by expanding their reach and being seen by more people. Of course, with multiple franchises all operating under the same umbrella, it means the business can make more money.
With a franchise, the owners of each franchise will get to keep the majority of their profits. However, a percentage will go back to you as you are technically the owner of the brand and business model. This is a very popular method of expanding a business because it requires minimal effort on your behalf. The only worry is that a franchisee might run the business poorly and drag your brand through the mud. This is why it’s important to choose your franchisees wisely.
Chains
People always get chains and franchises confused because both are examples of the same business/brand existing in multiple locations across one city, country, or the world. The big difference is that a chain is owned by one corporation. If you own a business and decide to open a new location, that’s a chain. You may employ someone to manage that chain for you, but you still own it.
The benefit of chains is that you can make a lot more money as it all goes to you. Of course, you need to use your profits to pay all the employees in all of the chains, but any profits are pocketed by the business.
The major downside is that your business can lose out if a chain doesn’t do well. If a franchise fails to succeed, the local owner is the one that feels the brunt of the failure; it won’t really affect your overall business goals because you’ve not put money into the franchise. When chains fail, it does affect your bottom line. Plus, it’s more effort to manage franchises because you are in charge of everything.
Overall, both chains and franchises offer opportunities to grow your business in new locations. Both have pros and cons, so it’s up to you to decide which one you think will benefit you the most. Some of you may prefer to franchise your business, while others might go down the chain route.
