Franchisors

Every successful business with the intention of growing and expanding should take franchise system into consideration as a possibility for its expansion. There are many possibilities that the system offers, and one of key ones is using other people's money to open your own new outlets, which means that the business can expand more quckly with highly motivated people (investors, future franchisees)who will run those outlets, while the costs of management in the head office and on the field will be lower compared with costs of running your own network. Of course, such advantages have their other side, which is the fact that the franchise business will always have smaller profit than private business, and larger initial investmenta for designing a franchise and network development.

Also, future franchisor will have to cope with the inevitable difficulties of communication and dealings with the franchisees. That is why the whole proces of designing a franchise and network has to be left over to experts, because you have to bear in mind that you are creating a formula which will be in operation for years to come with only some smaller modifications. So, the inital investment may seem expensive but in the long run it solves the problem of expanding your business, and problem of not having the 3 essential factors for it: time, money and motivated personnel. By entering into franchise system all of the three factors are provided by the franchisor.

Basic criteria

You will design a franchise if you want to expand your business significantly, that is, if you want to expand it to its optimal size and maximal profitability. But not all businesses can become franchises, although most of the business concepts can. To become a franchise a business must meet some basic criteria and has to be:

• Unique - new concept with potential of expanding in nacional and internacional environment
• Profitable - the concept must make money firstly- to franchisor,and after s franchise has been designed, the profit limits incorporated in the concept have to be great enough to allow each franchisee who has jioned the system an attractive return on his investment.
• Systematized - all operating systems of a business have to be elaborated on in detail and efficient. Those systems must be in a form of a manual.
• Easily transferrable - it sholud be ralatively easy to transfer total knowledge and experience to franchisees
• Available - if a franchise is very expensive, very few people can afford it. An ideal investment in a franchise would amount from 5 000 to 40 000 euros,because there are a great number of citizens who can afford such an investment.

Advantages of franchise
as a way of expanding a business

As we have pointed up in the introduction, there are some basic advantages of expanding a business through franchise system, and those are:

• Other people's money
• Skilled and motivated managing personnel
• Time
• Simplicity
• Efficiency - Profitability
• Fast expansion
• Reaching an optimal size
• Great consumer power of a chain
• Ensuring great locations
• Market dominance
• Development of shared advertising materials
• Maximal profit