Franchise or Expand? A Smart Growth Checklist
Last Updated on 5 September, 2025
Most business owners dream of the day when they’ve got more customers than they can handle—it’s a good problem to have and a clear sign of growth. If this happens to you, you’ll have a crucial decision to make: Should you franchise your business or expand by opening additional company-owned locations?
This guide will help you navigate the complex decision of whether to franchise or expand. We’ll consider the pros and cons and provide a clear checklist of considerations to help you make the best choice for your business.
Key takeaways:
- Franchising and direct growth both offer the opportunity to reach new customers and earn more revenue
- Franchising requires less up-front capital and less hands-on control so you may be able to expand faster, but you’ll give up a share of the profits.
- Direct control means you take on more risk up front due to higher costs to open a new location, but you keep total control of your brand and can earn more profits later
What does it mean to franchise vs. expand?
Franchising and expanding both allow you to reach new customers. However, they work very differently.
Franchising involves licensing your brand, systems, and operations to independent owners (franchisees). You collect upfront franchise fees and ongoing royalties, while the franchisee handles the day-to-day operations.
Direct Expansion means you open and operate additional locations yourself, maintaining 100% control and ownership, but also taking on all the costs and responsibilities.
Franchise vs. expand: pros and cons
Franchising vs. direct expansion have different benefits and drawbacks. You should consider both when deciding which approach is right for you.
Pros and cons of franchising
Franchises account for 3% of the United States’ Gross Domestic Product (GDP) and generate $897 billion in economic output, according to the International Franchise Institute. There are around 831,000 franchise establishments in the United States, so this business model has shown great success.
However, there are both pros and cons to franchising your business. Here are some of the biggest advantages and disadvantages to consider.
Pros of franchising:
- Motivated Operators: Franchisees have skin in the game. They’re often more driven than salaried managers.
- Geographic Expansion: When you franchise, you can grow into new regions without managing every local operation yourself.
- Lower Operational Burden: You manage the brand, not the store.
- Greater Chance of Success: Research from the U.S. Census found that franchised businesses had higher survival rates during their first year than independent businesses
Another major benefit of franchising is that it typically has a lower capital requirement: DrummLaw reports that it generally costs between $27,000 and $129,000 to franchise a business. Usual expenses include the creation of a Franchise Disclosure Document and a new legal entity for the franchisee.
By contrast, opening a new location can cost $200,000 to $500,000 when factoring in leasing or buying property, renovations, stocking inventory, and hiring employees. Franchisees also pay their own costs, minimizing your capital requirements and enabling you to scale more quickly with minimal financial investment.
Cons of franchising:
- Loss of Control: Inconsistent service quality is a risk, and you put your business reputation on the line.
- Legal Complexity: Franchise Disclosure Documents (FDDs) and compliance are mandatory and can be complicated. You’ll need a good lawyer to help you through the process.
- Profit Sharing: You earn a percentage in the form of royalties, not 100% of profits.
Franchise success story
Neaumix Fit is a great example of a successful franchise. After franchising throughout California, Neaumix Fit has now begun moving forward with plans to expand into new states. “Having locations out of state is exciting, and WellnessLiving made it so easy for us,” founder Melissa Chavez said.
Chavez was able to expand because she had the right tools. Neaumix Fit uses WellnessLiving to schedule and report franchise dues and waiver management, and to communicate effortlessly with clients through WellnessLiving’s built-in email tools. WellnessLiving also provides plug-and-play training to support franchisees, making it easier to manage quality control.
How Neaumix Fit Scaled from 2 to 13 Locations with WellnessLiving
Pros and cons of direct expansion
Opening multiple locations can increase revenue and profitability by expanding your reach into new markets and making your brand more visible. When you open new locations directly, you have control over the process and can claim 100% of the profits.
However, there are both pros and cons to direct expansion.
Pros of direct expansion
Here are some of the biggest benefits of directly expanding your business:
- Total Control: You manage staff, marketing, and the customer experience. You aren’t placing your brand in the hands of independent operators.
- Higher Profit Margins: Franchise royalty fees typically range from 4% to 12% of revenue, according to the Small Business Administration. By contrast, with direct expansion, you keep all revenue rather than just collecting royalties from franchisees.
- You don’t have to find franchisees: Your ability to franchise depends on finding interested franchisees, which can limit expansion opportunities. When you open a direct location, you aren’t dependent on others.
One of the pros of direct expansion is that you avoid a major con of franchising: the legal risks. Holon Law Partners identified multiple risks of franchising, such as inadequate franchise agreements that leave you open to lawsuits, difficulty enforcing quality control guidelines, and training challenges. WellnessLiving’s plug-and-play training support can reduce but not eliminate these risks.
Cons of direct expansion:
Here are some of the biggest disadvantages of direct expansion:
- High Upfront Costs: Real estate, salaries, and equipment costs can add up to hundreds of thousands of dollars. You bear all of this cost burden yourself.
- Operational Intensity: Managing multiple locations is resource-heavy. You will need to directly employ and oversee staff performance. This means you will need to comply with wage and hour laws in multiple locations.
- Slower Growth: When you fund and oversee each location yourself, your business will grow more slowly.
Direct expansion success story
LIVunLtd is an example of a company that grew successfully through direct expansion. It’s now the largest single-source provider of fitness equipment, amenity management, and wellness programs in North America, and is responsible for managing facilities in both the U.S. and Canada.
A total of 35 of those locations are powered by WellnessLiving, which offers software solutions that allow for differing business models in different centers, enable faster staff onboarding, and facilitate marketing through automation, reporting, and analytics that provide up-to-date business insights.
How LIVunLtd Powers Its Expansive Fitness & Wellness Operations with WellnessLiving
Franchise vs. Direct Expansion Checklist
Still not sure which option is best for you?
Choose franchising if:
- You want faster growth with less capital
- You have a strong, replicable business model
- You’re ready to let others operate under your brand
Choose direct expansion if:
- You want total control over brand and operations
- You have the financial resources to self-fund growth
- You want to maintain all profits and manage quality tightly
How WellnessLiving Supports Both Models
Whether you franchise or expand, the right tech infrastructure is crucial. WellnessLiving offers tools that serve both strategies:
Franchisors can take advantage of:
- Franchise Cloud to enable centralized management of all franchise locations
- Automated Royalty Collection to ensure consistent payments and reporting
- Training Modules to standardize onboarding across regions
Those who choose direct expansion can benefit from:
- Enterprise Cloud to access templates for scaling operations quickly
- Role-Based Staff Management to assign roles and permissions by location
- KPI Dashboards to compare performance across multiple locations
And owners of both business types can use features offered by Wellness Living including:
- Booking & Scheduling: You’ll have a unified platform for all locations
- Marketing Automation: Email/SMS campaigns, loyalty programs, client retention are all tools on offer
- Client & Staff Apps: Centralized communication, attendance, and reviews are found in one centralized platform
No matter which path you choose, leveraging technology platforms like WellnessLiving.com will streamline your operations, reduce risk, and position you for long-term success.
Ready to Grow? Schedule a demo with WellnessLiving to see how our tools can help you scale your business through franchising or direct expansion.
