Gather.com:

If you are looking to start a business using the franchising model, then there are certainly lots that you have to consider before hand. It’s also, probably, wise to consider consulting with a suitably qualified specialist. Franchising is a model used by many large businesses, including Subway and McDonald’s, which has inevitably contributed towards their rapid expansion and global presence.

Doesn’t Dilute Equity
When you finance the growth of your business through franchising it allows the existing shareholders to maintain a greater share of equity within the firm. This means that going forward they can run the business in a way that they see fit, and capitalize on opportunities when they arise.

Scale Quicker
Your business will be able to scale much quicker when you opt for the franchising model. Each time you enter into new markets, and sell more franchises, your balance sheet will become stronger through franchising fees. This is in comparison to other businesses, where they will often have to heavily leverage their business or dilute equity to finance this.

Limit Losses
Dependant on the structure of your franchise agreement it is unlikely you will be able to make a gross loss from selling a franchise in any giving trading year. Most franchisees pay a yearly management fee to the franchisor, which is a percentage of revenue. This means even if one particular franchise is not profitable, this will not impact the business as negatively as it otherwise would. This makes the business far more stable, with more predictable earnings than most companies.

Well Managed… read on.

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