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01 Mar 2024

Benefits of Franchising for Franchisees & Franchisors

Part of what makes franchising a great business solution for both franchisors and franchisees is its win-win nature. The basic design of a franchise system is intended to provide everyone involved with what they need and want. A franchisor creates a brand and business model that are tested and proven, then provides them to franchisees who want to open their own business; this arrangement provides benefits to everyone. Let’s take a look at the values and perks franchising offers, whether you’re opening your own business or growing your existing business.

The Popularity of Franchising

Before we get into specific benefits of franchising, you may be wondering just how viable and profitable franchising is today. According to economic data analyst company Statista, as of 2023 (the most recent year with data available), there are 805,436 franchise establishments in the U.S. alone, employing approximately 8.44 million people. In 2021, the economic output of franchises was valued at $790 billion.

This sort of economic presence in the U.S. is a testament to the proven nature of franchising. While franchise establishments took a hit in 2020, very likely due to a combination of difficult economic conditions and the COVID-19 pandemic, they’ve rebounded to surpass pre-2019 numbers, which is a good display of resilience and staying power as a business concept.

Financial Franchisee Benefits

Now let’s look at the benefits of owning a franchise, starting with the financial benefits of franchising. When starting any business, building up a customer base is crucial. While an independent business starts out unknown, a franchise benefits from the established reputation of its brand. Brand recognition will attract more attention sooner, as well as encourage customer trust in your quality of services or goods.

Another franchising boon is purchasing power. Franchisees can receive bulk discounts on goods and services they use regularly. Where an independent business will struggle to find discounts for the volume of their business, franchisees can make good use of their brand’s market presence to save on expenses and improve profit margins.

Franchisors also provide their franchisees with support services, including large-scale advertising for the brand and market research. Where independent businesses can only depend on the small, local advertising they themselves can afford and their own limited marketing capacity, franchisees can count on franchisors to promote the brand, which includes all of them, giving them the sales boost of large-scale advertising.

Buying a franchise comes with growth opportunities that would be much more difficult with an independent business. Many franchisors offer multi-unit expansion agreements; franchisors will help with starting multiple locations, either from the outset or after you’ve had some time to run your first location. Being able to grow your market presence can be a revenue multiplier for an ambitious entrepreneur like you.

Lastly, if you need a business loan to get started, you’re in a much better position to get one opening a franchise. While an independent business owner may struggle to convince a bank or lending company that their business model is viable, lenders are much more inclined to finance a business with a proven brand than an unproven newcomer.

Operational Franchisee Benefits

It’s not just monetary benefits that franchising provides; it also makes operations easier. One of the most obvious ways franchisees benefits is through training. Independent business owners either need prior industry knowledge or experience or have to learn as they go along. Franchisees, meanwhile, receive training on running a location under the franchisor’s brand. This training doesn’t stop with onboarding, as most franchisors also provide ongoing training to keep franchisees up to date on the latest practices and developments with their brands and industries.

Another perk of franchising is the premade business model. While independent business owners have to develop their own models and operating manuals, a franchisor has already done the heavy lifting there, providing franchisees with literal instruction manuals on how each part of a brand location should be run.

Direct support services are another boon for the franchisee. Some areas of business administration are handled directly by the franchisor. Rather than having to split their attention between serving customers and handling the behind-the-scenes work, as you would with a solo business, most franchisees receive administrative services from the franchisor, including the previously mentioned marketing and advertising services, as well as supply chains, HR management, IT services, and more.

Franchisor Benefits

Franchisees aren’t the only ones who receive the benefits of franchising. Franchisors also get a lot in return for opening their doors to business partners who run their brand’s locations. While a solo business owner can try to expand their operations by opening multiple directly-owned branches, many have discovered the benefits of franchising their businesses.  

A business owner looking to expand their business on their own has to pay each new branch’s opening expenses. But a franchisor has the benefit of business partners who will take on the bulk of those costs in return for the franchisor providing a proven business model and brand. It’s one of many win-win arrangements between franchisor and franchisee: The franchisor expands its market footprint, while the franchisee gets to open a location with customer interest already established.

A franchisor also benefits from steadier revenue. The independent business owner’s revenue can dip seriously if their branch revenues fluctuate. But a franchisor has a more stable stream in royalties. Each franchisee manages their own finances to account for their expenses, including royalties, ensuring the franchisor’s revenue stream wavers less than it would without that buffer. In return, the franchisee receives the above-mentioned valuable franchisor services and assistance with running their locations.

Lastly, while ambitious business owners want their businesses to grow, an independent owner has to build up capital to open each new branch themselves. A franchisor can grow their brand much more rapidly by signing on new, ambitious franchisees; both franchisor and franchisee to grow their business together.

The benefits of franchising for a franchisor include operational perks too. A franchisor can focus on the big-picture operations of their brand, while an independent owner would have to hire site managers for each branch or manage all the locations themselves. Franchising also provides the franchisor with customer information; reports on customer behavior and feedback provide the kind of information an independent owner has to pay a consultant or third-party service to get. Finally, a franchisor can leave employee management for each location to the franchisees. The franchisee gets the independence to set up their location(s) as they want (within brand requirements), and the franchisor doesn’t have to micromanage each location.

Let MFV Expositions Show You More Benefits of Franchising

Whether you’re a franchisor or a franchisee, our franchise expo events are a great way to find what you’re looking for to grow your business. Our 32+ years of experience in helping the franchising world connect is at your disposal, from helping you network and connect with valuable business contacts to presentations by industry experts. Request exhibiting or attending information today to learn more about how MFV Expositions can help you.

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