Some of the most widely recognized brands are franchises. From Jimmy John's sandwiches to SportClips haircuts to Hilton hotel stays to RE/MAX real estate listings, franchising remains a powerful engine for expanding businesses in any product or service industry, and there’s plenty of reasons why. In this article, we’re unpacking the various dimensions of franchising and how you can harness the benefits as a franchisor.

Decreased Risks and Liabilities

With other business models, the leading partner or parent company must take complete responsibility for all risks and liabilities. That means all bank loans, lines of credit, and financing are liabilities assumed under the obligation of these leading parties. Likewise, risks such as profits falling short of projections or staffing issues preventing internal efficiency are also problems undertaken and accepted by the same entities.

The added risks and liabilities associated with each new unit prevent many business owners from seeking expansion opportunities. Franchising, on the other hand, offers a best-of-both-worlds solution.

In contrast to these other models, franchising requires less capital for the franchisor. As the “business owner” of their respective units, franchisees provide the startup capital by paying a franchise fee to the franchisor and funding the development of the business. Similarly, ongoing royalty fees supply the franchisor with funds to provide franchisees with training, support, marketing and advertising, and system improvements. At the same time, obligations for compliance statutes, lease agreements, and managing day-to-day operations also fall under the jurisdiction of the franchisee, not the franchisor.

As a result, franchising offers franchisors a path to business expansion without the added pressures of taking on more risks and liabilities. By entrusting part of your business to franchisees, you can experience all the advantages of growth without the growing pains and strains associated with starting new locations all on your own.

Amplified Brand Awareness

The ease of scalability not only opens the door to more locations and higher revenues, but also heightened brand awareness. Many businesses – like Pizza Hut, Subway, and Ace Hardware – become nationally recognized brands as a result of the franchise model. Every new location operates as a brand awareness multiplier, bringing more visibility to your products, services, and mission.

Franchising brings a particular aptitude for building a consistent brand identity. Formed to create standardized systems in customer service, creating products or services, operations, and even storefront look and feel, this business model is primed to create a cohesive customer experience. In this way, customers typically arrive at a franchise with a clear perception of your business and what it stands for.

But the sheer number of locations isn’t the only way a franchise amplifies brand awareness. The same distinct identity created within the franchise operation itself also plays out in the creation of marketing materials and programs.

Often as part of the official franchise agreement, franchisees contribute to a brand fund and/or pay marketing fees to franchisors. These funds directly support any national, regional, or local ad campaigns. Working in tandem with independent marketing initiatives conducted by franchisees, franchise systems create a unified effort for building brand awareness with target audiences.

The more awareness grows, the more a franchise captures additional market share within its industry. Coupled with its low investment and rapid expansion capabilities, franchising can easily scale your business into a competitive force.

Maximize Opportunities in Even More Ways

Aside from expanding and growing, franchise operations allow franchisors to harness other opportunities. For example, one of the hidden advantages to a franchise model is the opportunity for innovation at the unit level.

Outside of certain operational and branding requirements, franchisees operate as the primary business owner of their locations, making decisions on staffing, daily operations, and local marketing. Franchising offers franchisees the opportunity to suggest innovations to the franchisor that they believe may benefit the brand while also respecting the established overall brand.

Case in point, did you know the McDonald’s Filet-O-Fish® sandwich was invented by a franchisee? Lou Groen operated one of the very first McDonald’s franchises in a heavily Catholic neighborhood in Cincinnati. At the time, many practicing Catholics abstained from eating meat on Fridays. To circumvent plummeting sales, Groen developed the Filet-O-Fish in conjunction with McDonald’s corporate – and it was an instant sensation.

Aside from innovations, franchising also increases purchasing power. With so many locations purchasing large quantities of standardized products from a list of preferred vendors, franchisors can negotiate bulk pricing. The stable pricing not only protects units from market fluctuations, but also ensures inventory is always stocked and ready to serve any customer who walks through the door.

Though we already covered the ways franchising amplifies brand awareness, it also brings other benefits in the realm of marketing and advertising. When franchisees contribute to shared marketing funds, it creates even bigger budgets for large-scale, high-quality advertising campaigns for broader media coverage. Franchise locations benefit from shared marketing budgets by helping stretch their marketing dollars for stronger results across the board.

Finally, franchisors actually have access to additional streams of revenue outside franchise fees and ongoing royalties. Depending on the style of franchise, franchisors can secure revenue through the sale of products or inventory such as branded merchandise, proprietary ingredients and technology, packaging, uniforms, and more. Similarly, training fees for leadership development programs, brand refreshers, or certifications can provide another source of income.

Achieve Higher Business Valuation with Franchising

Taking all of these benefits into consideration, it isn’t a surprise that franchising can typically provide a higher valuation to franchisors and franchisees compared to independently owned and operated businesses.

In this article, we’ve uncovered a variety of benefits associated with franchising. Whether its scalable growth with minimal capital, strong brand awareness, or paths to innovation, each advantage makes a vital contribution in building this heightened business valuation. Why? Because franchising offers a scalable, low-risk business model built on standardized systems geared toward reliable success.

At FranSource, we know franchising like the back of our hand. With decades of experience and a detailed and dedicated approach, we can turn any business into a thriving franchise operation, primed to take advantage of these opportunities – and more. Contact us today to start a conversation about what franchising can offer you and your business.