The Franchising Advantage – Economies of Scale

Despite what anyone says about the advantages of a small enterprise, no one can deny that size does matter and the “law of bigness” is alive and well, especially in the world of franchising. Small companies have a trouble competing with franchised outlets that are large with a strong brand name behind them. Still, that is only the half of it, you must also consider the economies of scale involved on the purchasing end.

These economies of scale provide a sliver of percentage to make the franchisor more profitable to re-invest in its brand and the services it provides to its franchisees, while still providing hopefully lower costs for the franchisees in the system. A small independent business just cannot run pace for pace with a franchised outlet, they have to work harder and smarter than their franchised outlet competitors.

When considering a franchise business opportunity you must remember one of the key advantages to a franchised business over any other small business for sale; and that advantage is economies of scale. In fact, the economies of scale often allow a franchised business to compete head-to-head with a large corporation with multiple outlets, as they too have economies of scale. Still the franchised outlet also often has an owner/operator with skin in the game.

If you were to bet on a business or a brand, which is locally, regionally or nationally, you should be betting on the franchise company, as they have all the advantages including one of the most important of all; economies of scale. Because in the end size does matter, it matters a lot, so think on this.

Leave a Reply