There are a number of ways to expand any business in any industry. From corporate expansion to joint ventures to dealerships to franchising, business owners have a multitude of options when it comes to growth. Choosing between these options depends on factors like your long-term goals, ideal levels of oversight, and desired levels of assumed risk.

At FranSource, we specialize in transforming businesses into effective franchise systems. Through our industry expertise, we unravel the intricate considerations business owners face when navigating expansion. In this article, we’ll examine popular expansion methods and the reasons why many businesses in a multitude of industries choose to embrace franchising.

Surveying Your Expansion Options

As franchise development specialists, we know the franchising process like the back of our hand. Even so, we also know there are a variety of methods for expanding your business outside of the franchise model. Here is a quick rundown of the most common business expansion methods implemented across various marketplaces.

Perhaps the most familiar mode of growth is corporate expansion. In this scenario, companies facilitate the entirety of opening new locations. Along with significant capital investment, these units require additional employees and hierarchy levels, complete with comprehensive oversight that can make expansion slow and expensive. This method is typically employed by large brands like Walmart, Apple, or Macy’s.

Formed by multiple parties, whether between individuals or corporate entities, joint ventures or general partnerships leverage shared capital, industry knowledge, and risk. While this shared responsibility can be helpful, it can also pose legal challenges regarding ownership. This method can also stall rapid expansions due to the multiplicity of owners. Most law firms, medical practices, and small service practices excel with this expansion format.

Limited partnerships invite investors to raise capital without taking part in day-to-day operations as they would in general partnerships. Instead, investors only risk their invested sums and will receive returns on their investment as the company grows. Private equity firms, real estate development firms, and entertainment ventures often operate with limited partnerships.

Licensing, also known as a dealership, expands businesses by increasing lines of distribution. The relationship between business owners and dealers hinges on shared intellectual property, offering access to the trademark, brand name, logo, products, proprietary technologies, and more. Despite the “freedom” offered through dealerships, dealer models can lead to brand inconsistency in everything from brand look to daily operations. Popular dealerships include car dealers like Chevrolet and Honda as well as equipment dealers like John Deere and Grainger.

Don’t Get it Twisted – The Difference Between Franchising and Dealerships

Franchising is one of the most popular methods business owners choose to expand, and there are plenty of reasons why that’s the case. To start, it provides one the fastest ways to grow your business by building an extensive network of trusted partners, known as your franchisees.

These individuals supply the necessary startup capital, commitment, and business oversight. In turn, you, as the franchisor, provide the business system, resources, training, and support to enable them to operate your exact business model in a given locale.

Franchising creates a mutually beneficial relationship. Aside from the separate responsibility sourced from the investments made by both franchisors and franchisees, the success of this business expansion model hinges on the franchisor’s ability to exert significant controls over each franchisee’s business to ensure each franchise unit operates according to the franchisor’s specifications, standards and requirements.

By contrast, dealerships maintain a degree of association with a certain brand in so far as they are licensed to sell products. However, consumers often will not associate the dealership as an extension of the brand, but simply an access point to the desired products. Unlike franchises, the dealer model creates a more distant connection between the corporate brand and its dealers.

In addition, the dealership model does not permit the licensor to exert the same degree of significant controls that a franchise model permits, as each dealer is free to operate their business at they deem best. As a result, the business in which the corporate brand’s products are sold may operate completely differently than other dealers within the network. This also creates inconsistencies in marketing and branding, and conflicts of interest with competitive products that a dealer may sell. Consequently, when implemented with certain business models, dealerships can ultimately leave unrealized profits on the table.

The franchise model, on the other hand, offers business owners more oversight and control of the individual franchise locations. In practice, this difference looks like franchisees adhering to training requirements, operational protocols, accounting systems, store designs, branding guidelines, and product sales and service techniques. In addition, Franchisors typically require franchisees to conduct certain marketing activities and spend specific amounts, and only permit franchisees to sell approved products and/or services. As a result, every franchise location will provide a consistent, established experience for consumers.

By leveraging an existing brand perception alongside robust support systems, the franchise business model offers all parties the opportunity for almost limitless growth potential using a supportive, proven operational framework.

Is Your Business Franchiseable?

After evaluating various business expansion models, you might feel like franchising offers the best balance for maintaining the heart of your business without straining attention to your corporate location(s). Even if the system itself seems like the perfect fit for your expectations, you might also be wondering if your business model is compatible with franchising.

Specialty shops and services are businesses that are not easily replicated, making them incompatible with the franchising model. Similarly, businesses that have not unlocked consistent profitability or developed thorough internal systems may require more time before pursuing franchising.

Even with these exceptions, you might be surprised to learn the diverse spectrum of businesses that choose to expand through franchising. At FranSource, we’ve advised and assisted clients in numerous industries as they engage in the franchise development process. From child development businesses to in-home medical care providers to restaurants and retail stores, we know that franchising is a powerful tool for expansion. All it takes is a detailed and dedicated approach to making every aspect of your franchise opportunity oriented toward lasting success. To determine your level of readiness, you can even take our 15 Key Question Franchise Quiz to give you a starting point on your journey to becoming a franchise.

Franchising offers a well-balanced path to growing nearly any business. As leading franchise development experts, the FranSource team brings decades of experience helping businesses grow into their full potential through franchising. Contact us today to start your next chapter as a successful franchisor.