Franchising creates another source of income for the franchisor, through payment of franchise fees, royalty & levies in addition to the possibility of sourcing private label products to franchisees.This capital injection provides an improved cash flow,a higher return on investment and higher profits.
To the franchisor, franchising means the spreading of risks by multiplying the number of locations through other peoples investment That means faster network expansion and a better opportunity to focus on changing market needs which in its turn means reduced effect from competitors.
The franchisor can have a smaller central organization when compared to developing and owning locations themselves. Franchising also means uniformity of procedures,which reflects on consistency,enhanced productivity levels and better quality.
With a smaller central organization,the business maintains a more cost effective labour force, reduction of key staff turnover and more effective recruitment.