Why Companies Choose to Become Franchisors, and how this affects you. Why do companies choose to become franchisors?
The lure of "risk-free" profits is one reason. Other reasons center on man power the availability of expansion capital and quick access to new markets. It is not uncommon for a company, committed to growth through company-owned and company-managed units, to switch allegiances midstream. Since franchisees supply the manpower and the capital for growth- with little or no risk to the company- the transition to a franchise system can be accomplished with relative ease. It is certainly an inexpensive way to restart a stalled market-penetration program in a short space of time.
Once objectives have been satisfied, the emphasis on franchising may shift back to the company-owned and company-operated unit philosophy. One of the side effects is pressure on existing franchisees- the successful ones- to sell their units back to the company. A compromise tactic is to allow the franchisees to keep their units- with no expansion privileges- while company-owned units are opened around them.
Should the company decide to continue to offer franchises on a limited scale, the company stores division will always have the right of first refusal on new locations as they become available. Existing, qualified owners will be next in line, while new franchisees will be last. You go with the long profits first (company stores) and then experienced operator before you take on an unknown.
Scared yet? Don't worry. You should not be overly concerned about buying a franchise from a reputable franchisor with a strong company division. Just be aware of where you fit in an guide yourself accordingly.
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