New or unique concept that has the potential to expand Nationally and even Internationally. These systems and procedures should be in manual form. It should be relatively easy to train others in the use of the Systems and Procedures. The profit margins built into the concept should be great enough that every franchisee who adheres to the system can realize an attractive Return on Investment. If the franchise is very expensive there will be few who can afford it.
Capital is always scarce in growing a business.
In franchising the capital needed to expand the business is provided by the Franchisee. It is the classic case of using OPM, or other peoples money. It is difficult to find and keep good experienced managers, who are so necessary to grow a business. With franchisees, you have people who are well trained in the franchise systems and who are also very motivated because their capital is at risk. Profitable, Franchise units tend to be better run, therefore more efficient and profitable than company owned units, for the simple reason that the Franchisees capital is at risk and they tend to be very motivated.