Franchising May Not Be for Everyone: Exploring Alternatives

In an article originally published on Entrepreneur.com, iFranchise Group Senior Advisor, Emiliano Jöcker, notes that while franchising can be the right growth vehicle for businesses with an established brand and proven concept that’s ripe for growth, not every business can or should be franchised. In those cases, there are other options available for business owners.

Jöcker discusses the requirements for, nuances of, and pros and cons of trademark licensing agreements. He contrasts licensing with franchising, and provides examples of concepts that go the licensing route. He also lists a set of additional alternative business expansion models, including corporate-owned units, dealerships and distributorships, agency agreements, and joint ventures.

In addition, he notes that the selecting appropriate business growth method depends on several factors, including the type of concept, service, or products; risk aversion factors; access to capital; location and current market conditions. And, he cautions against choosing an alternative to franchising, running the risk of potentially overstepping legal boundaries and definitions, and inadvertently becoming a franchise system, which carries its own legal framework and stipulations. 

A selected business expansion strategy can, of course, change over time. Licensors and distributors will sometimes restructure their programs into a franchise model, especially if they see the need to change the fee structure and/or maintain additional control over operations.

In the end, doing sufficient due diligence, and consulting with professionals such as attorneys, accounting and franchising advisors, and talking to other business owners who have contemplated these same decisions, is critical to making the right move for a specific business’ future plans.