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 Franchising or Company Owned?
19 Jan 2010
Franchising or Company Owned?
All businesses face the issue of growth. Which growth strategy to choose is heavily dependent on the goals of the businesses and the owners.
Franchising
It has been estimated that by 2050, 60% of Australian businesses will be franchised. What makes this business model so popular? Franchising utilises the motivation and capital of franchisees and allowsrapid expansion. Franchisee motivation is also a key attribute of the franchise business model, positively affecting sales turnover and profitability of the franchise.
Company Owned Operations
Company owned networks require a comparatively higher investment which, depending on capital availability, may limit the speed of network expansion. However, this investment provides greater control for the owners and potentially higher financial returns.
For large networks, the additional burden of staff rostering and management can become cumbersome. This must be considered when selecting a suitable expansion model.
Choosing the Optimal Growth Model
Franchising suits some businesses while a company owned business model suits others - there's no hard and fast rule. Both franchising and company owned operations have inherent risks and challenges. Understanding these from the outset can significantly alter the growth path of any business.
It's important to realise that these two options are not necessarily mutually exclusive and many networks successfully employ both. DC Strategy frequently assists businesses to develop their optimal growth model based on their individual business requirements.
Briar Harte
Briar Harte is a Consultant at DC Strategy.
DC Strategy is the region's leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region's most successful businesses. Contact Briar Harte at briar.harte@dcstrategy.com
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