Business Expansion: Franchises vs. Branches

When viewing an opportunity to expand a business, it is necessary to analyze which of these options is best to get it accomplished.

Monday, June 8, 2009

One of the key aspects is financial. Franchises usually require a higher investment in the beginning, but once they are granted, they will have marginal costs that are lower each time.

Conversely, expanding operations by opening branches involves similar amounts of investment for each one, reason for which access to financing is key in this option.

José Fernandez, in his analysis of the topic in PrensaLibre.com, said, "Another consideration is the amount of money that each branch or franchise is going to make. A scenario is presented here more or less in these terms: I earn 19% net each branch, and I feel that this money is more than the 3% I can earn through royalties for every franchise."

More on this topic

The Four Pillars of a Franchise

August 2009

Franchising is always an option for expanding a successful business model.

In theory, any business can become a franchise. However, not all activities are ideal to be developed under this model, so a good diagnostic is the first step, to check the viability of the model in each particular business activity.

Franchising: A business Model for Many

February 2013

The market offers from franchises with free access, to large chains with royalties over one million dollars.

An analysis by Alvaro Santana reviews how franchises - as a business-model - suit different business attitudes, maintaining its main advantage: you avoid a "learning curve", minimizing the risk of failure.

Markets for Exporting Franchises

October 2013

Only a few Latin American countries have a mature franchise market, creating an opportunity for other franchisors.

Experts agree on this, believing that Latin America represents a perfect market for expansion. Every year the industry generates about $80 million and consists of more than 5000 brands, reporting growth exceeding 10%.

Salvadoran Firms Follow Franchise Model

March 2009

Franchise projects are considered an alternative for expanding operations, strengthening brands and generating more jobs.

The Director of the Finance Ministry's (MINEC) Production Development Fund (FOEX), Vladimir Velasquez, informed Elsalvador.com: "The franchise appeal of investment and profits is already knocking on the doors of Salvadoran small and medium sized businesses which have taken the lead on this issue.

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