Branching Out vs. Franchising: Which is Better for You?

Entrepreneurs having a meetingAs a business owner, your primary goal is to reach your bottom line goals successfully. When you first opened up shop, you most likely focused on making it to this point. And now that you have consistently made the profits you initially had in mind, the next part of your plan to success is expansion.

There are some ways to expand a business, with the most common of which is through opening another branch or store. However, just because this is the typical strategy doesn’t mean that it’s the only option you have. A good alternative is franchising.

To help you determine whether the answer to your question “Should I franchise my business?” is a yes or no, take a look at the cost-related differences between the two aforementioned expansion options.

The cost of branching out

When figuring out which of the expansion methodologies to follow, it’s crucial, you take a closer look at your finances first.

In opening another branch, you’d have to spend a considerable amount of money for leasing the new place; setting up the necessary equipment, utilities, and furnishing; and paying for your new employees’ wages.

The cost of franchising

The opposite happens when you franchise: the franchisees will pay you an amount in exchange for the rights of taking part in your business operations. They will then continue making payments to you (an agreed-upon portion of their profits) throughout the term indicated in the agreement.

As you can see, franchising your business as a means to expand costs less than branching out on your own.

Keep in mind, however, that the cost is just one part of the equation. There are some other things you need to factor in when deciding between these two ways of growing your business, but the lower cost of franchising is indeed a huge contributor.