According to Entrepreneur.com, approximately 300 new franchise concepts are launched every year. The introduction of these newbies, along with other brands that fall under the category of emerging franchises, actually make up the majority of all opportunities.
Many experts agree that approximately 80% of all franchises have less than 100 units. That makes for an extremely competitive landscape, as each of these emerging brands vie for the attention of potential franchisees.
To succeed in the world of franchising requires continual improvements to the brand’s business model, growth strategy, systems and processes. To that end, I believe controlled growth is key to both initial and ongoing success for emerging franchise brands.
Having worked with many, many entrepreneurs exploring franchising as a business growth and expansion strategy, I’m often asked the question, “How does a new franchise company sell franchises without brand recognition?” Here are my thoughts…
Initially, the founder is the brand. It’s his or her passion for the business. It’s how he or she treats customers and employees alike. It’s how the business is promoted within the local market. Not just through typical advertising efforts, but through solid grassroots, organic efforts.
The initial franchise candidates are actually the “low hanging fruit” of the original business. These are the customers that inquire whether or not the business is a franchise and how they can learn more about owning their own. Most are interested because the business appears to be thriving and they’ve seen the owner (founder) time and again, always smiling and shaking hands. Public Relations efforts should ensure this occurs.
They admire the owner a great deal and will base their decision to open a franchise location, on the potential of establishing a relationship with the owner. They’ll compare the opportunity to other franchises and justify to themselves that they’re in on a ground floor opportunity with a direct line to the founder. As such, they feel their probability of success is greater because their location will be in the home office city and if they need help, they could easily approach the founder and the home office because of the proximity to their franchise location.
Ideally, the next few franchisees will also be in the same market as the original business and the first franchise location. It’s prudent to only expand locally until brand awareness begins to be achieved in the market and immediate suburbs or outlying towns, some semblance of an ad cooperative is developed for economy of scale, and support systems are perfected. Now the concept is ready to expand outside the initial market or hub.
However, it is often financial suicide to entertain requests from candidates all over the country. Instead, development efforts should be concentrated on one or two cities relatively close to the home office city. For instance, if original business and home office is in Houston, the natural progression would be to promote the opportunity next in San Antonio/Austin and Dallas/Fort Worth areas, and smaller markets in between.
My rule of thumb: Early-stage development should occur less than a 4-hour drive or a 2.5-hour flight from the home office market. Essentially, being able to provide hands-on support but still having the ability to make it back and forth in the same day or with just a one-night stay. Managing time is critical during initial development efforts.
As these markets start to become established with franchise locations, it’s advisable to promote the concept in another two or three markets. Maybe, explore another “hub” and “spoke” scenario. Let’s say, Greater Atlanta as the next hub.
Expansion efforts should be the same as they were in Texas and expansion out of that market shouldn’t occur until development moves from Atlanta to the suburbs – for instance, to Roswell, Alpharetta and beyond, for example to Savannah and Augusta. Then, as that occurs, the opportunity could be promoted close by in Nashville, Charlotte and Birmingham. Now, you see the spokes of national expansion beginning to form.
While this is going on, maybe inquiries start coming in from the Rocky Mountain Region. The Greater Denver Area would naturally become the hub as the gateway to Wyoming, Utah, Montana and into Idaho. Initially, locations should be developed in downtown Denver and out to the suburbs – Boulder, Centennial and even into Fort Collins and Colorado Springs. All the while building brand awareness.
It’s all about controlled growth and the founder exhibiting tremendous restraint in expanding too fast and in areas far away from his core group and subsequent hubs to be able to provide ample support, create ad cooperatives and build the brand geographically. Chances of franchise success are far greater at all levels of the franchise organization within the parameters of a controlled plan of development.
So, to answer the often-asked question directly, I suggest everyone in the system having a clear understanding of the founder’s vision. If it includes anything but a controlled development plan with his or her firm commitment to actively participate in the franchise sales process, the chances of selling the first ten to twenty franchises will be a frustrating, monumental task.
The results? Most likely the brand will immediately miss franchise development goals. Stakeholders will be upset as expectations are repeatedly missed. Before one knows it, the franchise system is scrambling to recover. Resources will be thrown at various ways to turn things around. Decisions will be reactive to the next fire that is burning or of a knee-jerk nature out of shear frustration. Little if anything will be done proactively with a plan. It’ll be akin to playing not to lose instead of playing to win. Although, I’m not sure what a tie relates to in business, so I must consider anything less than a win, a failure.
Have a great day. Make it happen. Make it count!