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Emerging Franchisors: Keys for Growth (Part I)

Franchising your business comes with great risk and great opportunity, especially during the early stages. In the push to achieve royalty self-sufficiency – or the point at which royalties from franchisees cover the corporate entity’s overhead costs – many emerging franchisors fail to notice problems with their brands or business models. These problems can lead to an unhealthy franchise system and disgruntled franchisees if they remain unresolved.

As you work to expand your brand’s reach through franchising, don’t let your goals for growth cloud your judgment. Patience, a solid strategy and a strong model will get you where you want to go.

This blog series will outline keys to healthy growth for emerging franchisors, focusing on three main areas: overcoming initial financial challenges, perfecting and growing a business model and ensuring consistent brand growth.

Overcoming Initial Financial Challenges:

As you take the first steps to build a franchise system, a smart financial strategy is more important than ever. Here are some principles to keep in mind as you begin the journey from business owner to franchisor:

  • Take Time to Analyze Feedback

Entrepreneur reviewing and analyzing data

If there are problems with your brand or business model, franchising will bring them to the surface. Taking a concept and transplanting it into a different market with different ownership is a test of the concept’s appeal and workability. You and your franchisees want a model that’s understandable and replicable and that consistently yields good results.

No brand or business model is perfect from the start, however. The best franchisors continually tweak their approaches in order to improve their businesses. They do this by listening to and implementing feedback.

Feedback comes in a variety of forms – customer responses, employee suggestions, franchisee input and system-wide data. When company leaders become so eager to expand through franchising that they ignore feedback and fail to analyze results, they set themselves up for problems. Make sure that you remain dialed into different types of feedback, and don’t ignore warning signs in a push to meet growth objectives. The health of a franchise system is more important than its size.

“Adding more franchisees when you haven’t worked out all the kinks will only create a bigger problem and lead to unhappy franchisees and a broken franchise system,” Steve Murphy, president of franchising for Winmark Corporation, said.

  • Have a Plan of Action

Two entrepreneurs working on a growth plan

Without a specific plan for growth, it’s easy to waste time and money as you try to build a franchise system. Approach franchising as you would any other venture: Start with a feasible, goal-driven plan of action.

This plan should include access to capital. Robust franchise systems eventually can reach royalty self-sufficiency, but you don’t want to cut corners in your rush to get there. Stick to your plan of action as you follow a measured, strategic path to royalty self-sufficiency. In the meantime, know where your money is coming from.

“Most emerging franchisors are short on capital and patience,” Murphy said. “They go into franchising without having a solid plan in place, they come in undercapitalized, and they want to grow too fast. The best advice is to approach franchising with discipline and effective planning.”

  • Reach the Right Franchisees

Handshake agreement

Your franchisees are your partners, and you entrust them with your brand. Many franchisors make the mistake of bringing on underqualified franchisees in order to hit expansion goals. This undermines your brand, and those weak links will come back to haunt you as your system grows.

In order to reach qualified franchisees that will be an asset to your brand, you must invest heavily in public relations, marketing and advertising tailored for franchise development. This gets your brand name in front of more candidates and increases your number of leads. Strategic campaigns can also improve the quality of leads and attract more candidates who meet your criteria.

Part II: Perfecting and Growing an Emerging Business Model

Check back in for the next post in this series, Perfecting and Growing an Emerging Business Model, which will discuss topics like establishing proof of concept and leveraging customer demographics.

With 30 years of franchising experience and 800+ franchise owners representing more than 1,200 locations for five brands, Winmark Franchise Partners can help you grow your brand through sound strategy and expert franchising advice. For more information, contact us here or at (844) 452-4600.