Buy In or Start-Up or Expand Out?

by FMS Franchise | Articles
2 minutes
Buy In Or Start Up Or Expand Out

How do you decide to “Buy In or Start-Up?” Better yet, you might have decided to start up, and now you are ready to “Expand Out” your business model through franchising.

While this infographic depicts certain franchise brands and investment numbers there is virtually a franchise opportunity for every budget and interest. From food services to home services and $5,000 to 5 million dollars.

While the infographic above does a great job of walking you through the decision to buy in or startup it doesn’t cover how to expand your business through franchising.

Table of Contents

How Franchising Works

Generally speaking, franchising means opening additional outlets through the sale of franchise rights to independent investors who will use your name and operating system. A franchisee pays a franchisor an initial franchise fee in return for the rights to open and operate a business under the franchise trademark and for training in how to operate the business.

In some cases, the fee may also cover additional services such as assistance with site selection. In most systems, after the startup period, franchisees also pay an ongoing periodic royalty fee–4 per cent to 10 per cent of sales on average–for continued support and training in advertising, marketing, sales, operational guidance, financial and human resources consulting, and other services.

Perhaps most important from your perspective, a franchisee furnishes all of the capital required to start the business and assumes all risk for success or failure.

Why Franchise Expansion?

Franchising has many attractive features, particularly when compared with more traditional methods of expansion such as opening more outlets on your own. Typically referred to as company stores, you own and operate these locations yourself. You provide the entire investment for the startup, and while you keep all the profits the company store generates, you are also responsible for all the losses.

This is great if you are passionate about preserving the values you built into your original operation and believe you are the only one who can do that. But if you want to expand more quickly and get ahead of a competitive curve, it may not be the best way to expand.

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