Alternatives to Franchising
Franchising can be a powerful, fast and rewarding method of expansion. However, it is not suitable for every business or for every owner behind the business. Although we at Franchise Generator most commonly assist with franchising, we can instead help you with alternative structures and we can help you with the planning and documentation and processes if the structure has similarities to franchising. Please contact us for details and to discuss alternatives if franchising is not for you.
It is worth bearing in mind that the label "franchise" does not have a single meaning. Often, when people refer to "licensing" it can mean a similar structure, and sometimes franchise structures can be very similar to distributor or agency structures. The simplest way to work through it is not to be concerned about labels or names, and instead focus on the right structure and system for you.
Examples of alternatives
Organic Growth - You could expand your business yourself, for example by setting up other outlets and hiring managers. This can mean large levels of investment and therefore greater risk, but you will retain full control and are likely to get higher rewards if the business is successful.
Acquisition - Another alternative is to expand by buying other related or competitor-owned businesses. This could mean even larger levels of investment and raises issues in relation to integration of the businesses, but would mean that you could rapidly expand with a network of established businesses and customers.
Licensing - This if often very similar to franchising, but within licensing or franchising there are many different structures in relation to ongoing fees or royalties, whether or not your brand name is used, what the upfront package or training involves.
Agency - Again, many franchises are similar to agency arrangements. Where possible, most businesses may want to avoid appointing agents due to the compensation that is payable on termination (it can not be contracted out of). Generally, an agent acts on your behalf to obtain the customers and orders but it is you who sells to the customer and enters the contract. The agent takes on lower risk, but often receives less in commission.
Distributor - Some franchises are similar to distributor arrangements. In a straightforward distributor arrangement, you would sell your products to the distributor at a discount, and the distributor then sells them on to customers, keeping the profit. The distributor does not usually use your trading name, and takes greater risk so generally the distributor will require more profit margin than an agent.
In each of the above three cases, you can consider exclusive or non-exclusive arrangements (subject to some legal constraints). Please contact us to discuss your structure and we can advise you to help you to make your choice.
Élise Billy provides consultancy services outside of franchising and can advise on strategic expansion and growth plans. Please see www.exbdirect.com for more information.