This article are provided for information purposes only, and are not intended as legal advice.


Should you franchise, license, use distributors or own corporately?

September 14th, 2009

Ever think about expanding into a new market, a new country, should you franchise your idea, license your idea, maintain ownership and use distributors or own the business corporately?  Which one is right?  They all are, it just depends on what you want to do.

 

If you franchise, you can expand without having to hire across the country however if you have a franchise, you are may not be able to get problems resolved as quickly as if they were corporate locations, you have a protocol to follow if you have a franchise.  You may not force the franchisees to expand or grow their business as fast as you want them to grow.  Once they paid for the franchise, they do not have to expand the business more than they are comfortable with, corporate locations on the other hand, you can add people, continue to expand and improve sales possibly more than a franchise in particular if you have a franchisee who is not motivated.

 

Do you get one large company to represent you in a country and allow them to expand?  You could set up it so that they pay you a license fee based on their sales but instead of dealing with 100 franchisees, you are dealing with one stronger company to represent you.  In this case, the license company may operate using their name and not under your trade name.  As a result, brand recognition may not be accomplished as easily as with franchises.

 

If you have the capital what about appointing a manager to grow the business in that foreign country. If you do not want to deal with local labour laws, income taxes, staffing, language barriers etc, this route may not be a good option for you.  If you believe that there is significant growth in this area, why would you give away part of profits by using a third party intermediary who could be a franchisee, licensed representative or distributor.

 

Remember, certain options require you have to capital therefore expanding without the necessary capital behind the main company could limit your options of selecting how to penetrate new markets and open up new countries to sell your products in.


Filed under: Business strategies — Gary Landa @ 8:35 am


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