Recently I announced that SEDA College had created a franchise model, and that from now on any entrepreneur willing to have their own unit could start.
Many people, however, came to me interested, and some of the questions they asked me were: Tiago, why did you choose the franchise model instead of the branch model?
The truth is that the franchise model is more scalable and easier to manage. But as this answer cannot be given in a simple way, I decided to write this article to talk a little more about it. Hope you like it.
Lower expansion cost
Franchises tend to require a smaller initial investment from the brand owner compared to branches. In the franchise model, the franchisee bears most of the costs associated with opening and operating the new establishment.
This means that the parent company can expand its presence in the market with a significantly lower capital investment, and what’s more, provide opportunities for other entrepreneurs who want to take advantage of the business’s know-how.
Risk reduction
With a franchise model, risks are minimized for both sides. For the franchisor, this avoids having a unit that makes losses. And for the franchisee, there is full support behind the business.
This way, the chances of a franchised unit going wrong are much lower than the chances of a branch not going well.
Business motivation
Franchisees, being independent owners, tend to be highly motivated to ensure the success of their units. After all, they invested their own money and have a direct stake in the profits.
This motivation often translates into more dedicated management and better customer service compared to a branch office, which may not have the same autonomy or direct motivation.
Greater agility in growth
Expanding through franchising allows a brand to grow faster. Well, you don’t need to have a lot of capital available for this.
After all, as franchisees assume much of the work and investment required to open a new unit, several franchises can be launched simultaneously in different locations.
This is something that can be challenging for branches, which depend on centralized management and investment.
Local adaptation
Local franchisees often have in-depth knowledge of the community and market in which they operate. And that makes a big difference.
They can adapt aspects of the business to better suit local needs and preferences, ensuring the franchise is successful in different regions.
On the other hand, a branch may follow stricter guidelines and have difficulty adapting to local nuances due to a lack of knowledge.
Ongoing revenue for the brand
For the parent company, franchises generate an ongoing source of income through royalties and fees, enabling reinvestment in the brand.
These payments, generally based on franchise sales or profits, provide a steady income without the operating costs associated with directly managing a unit.
While branches still have their place in certain business strategies, the appeal and advantages of the franchise model cannot be denied.
The combination of lower risk, reduced cost, business motivation, agility and adaptability makes franchises a highly attractive option for entrepreneurs and brands looking to grow and solidify their presence in the market. Do you agree?
