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Home>Business Resource Center >Business Articles >Direct Selling

Franchising

If none of the traditional distribution methods appeal to you, consider franchising. As a franchisor, you would be in a unique position to market your products to as many outlets as you choose, while collecting royalties on their gross sales.

A major differentiating factor between franchises and other distribution methods is that franchisees - who are owners rather than managers - pay for their own particular franchise with their own capital, a unique benefit for you as a franchisor. Newly indoctrinated franchisors are able to structure and restructure every aspect of operations, as well as dictate the relationship between franchisor and franchisees.

It is not uncommon for franchisors to modify the original business configuration for the sake of expansion. Typical modifications include changes to inventory, services, signage, renovations and the like. As the complexity of the franchised business increases, so does the difficulty in locating qualified franchisees, requiring a highly specialized skill in franchise owners.

Territory disputes will have to be ironed out during franchising negotiations. Although not mutually exclusive, the franchisee needs assurance that his particular market area will promote growth, while the franchisor is focused on the performance of all market areas.

Franchisees also expect guarantees regarding territory infringement, either from other franchises of the same business or competing outlets. Therefore, franchisors often grant exclusive territory privileges. The trick is that franchisors must select territories of optimal size to promote and sustain the desired growth rate while, not encroaching upon other territories.

When all is said and done, the distribution channel best for your product or service depends upon numerous variables. Whether you choose the traditional three-level system or opt for a less conventional model, remember to set clear sales goals and heed the advice of experts, especially those in the legal field.

As your product travels from manufacturer to end user, consider the needs of your end user:

• Are your customers satisfied?
• Can your product expand into an untapped target market?
• Would this be an affordable avenue for you to pursue?
• If not, would it be more affordable over a period of time or after specific conditions have first been met?

By establishing the best path for your product or service first, your marketing plan will then follow suit.

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