Benefits of franchising

An Illinois business owner who has a successful company may start thinking about expanding. One way to expand a company that has many advantages is franchising. By starting a franchise, the original business allows a franchisee to open, own and operate a business with the same name, products, services and trademarks. In exchange, the franchisor gets a share of the revenues from the new business.

Because franchising does not require any capital investment by the original business, it can allow a business to expand rapidly. The franchisee is responsible for signing a lease for the new property and paying for all of the startup costs. By franchising, a business can grow its bottom line without taking on new debt. Franchising also reduces any risks of expansion, as the typical franchise agreement places all of the operating responsibilities on the franchisee.

Another advantage of franchising is that the business structure naturally attracts motivated management. The franchisee will own the new business, so they will directly benefit from its success. When companies expand without franchising, they must select unit managers that don't have a stake in the company. Managers are usually not motivated to improve anything about a business because they don't see any benefit for themselves. Managers can also decide to leave the business, whereas franchisees will find that it is very difficult to leave.

A business owner who is thinking about starting a franchise may want to discuss these plans with an attorney who has experience with these types of transactions. Franchising can be very profitable if it is started at the right time, and an attorney may be able to help a business owner determine if the company is ready for it. An attorney may also be of assistance in selecting the appropriate type of business entity for the new structure.

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