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What's the Right Growth Model for Emerging Franchise Brands?

Emerging franchisors naturally want to quickly enter as many markets as possible. Brands with a strong proof of concept can more quickly and successfully use franchising as a vehicle for growth.

But, when they consider how they will award franchise agreements, they have to identify which franchise growth model – concentric, regional or national expansion – will facilitate a strong network of franchisees who feel supported by the franchisor.

All three growth models can be effective for emerging franchise brands, but they must be used with the right rate of growth and in the proper timeframe. Typically, expansion strategies start with concentric growth.

Build Momentum and Awareness with Concentric Growth

Starting locally with concentric growth around your initial corporate locations will help build brand awareness in your home area. This franchise growth model will contribute significantly to keeping the selection of franchise partners at the highest level since they will be from the area and likely have a relationship with the brand. This type of expansion will be the easiest to control and support as you add franchise locations. Being nearby means you can get to them when you need to keep them on course, and franchisees can more easily reach you when they need extra support.

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Local growth will benefit your franchisees, too. The strong brand presence will naturally increase consumer awareness, which will help drive them to your franchise locations and contribute to each location’s unit-level economics. Happy and profitable franchise owners will then provide positive brand validation to other entrepreneurs who may be interested in opening more locations, which is critical to the success of your franchise.

Concentric growth is often slower than regional or national expansion. But, when executed properly, it’s also steady. This gives you time to grow your franchise brand’s infrastructure before moving on to expanding regionally.

Emerging Franchise Brands Level up with Regional Growth

Regional expansion occurs after you have built a solid pattern of concentric franchisees at the local level. In addition, you, as the franchisor, have been able to support their growth and they will provide positive validation with regional franchise candidates.

Brand awareness should grow with each new location, which typically yields a higher level of understanding among consumers of who you are and what you stand for as a brand, making it easier to grow regionally. And, the added cash flow from keeping it local should allow you to expand your team to support a region now.

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Controlling your emerging brand’s growth is crucial during the regional expansion phase. Although it’s tempting to pick up the pace, growing too fast has serious potential pitfalls. The temptation to award franchises to just anyone who is well-capitalized can ultimately slow growth. If you do not continue to thoroughly vet franchise candidates, you may end up with franchisees who are not a good fit for the brand. They can do damage to the brand’s reputation and negatively impact validation.

When emerging franchise brands grow too fast, they risk compromising their onboarding and training execution. Expanding infrastructure might not happen quickly enough to keep pace with the number of new franchises awarded. Operational support for those early franchisees can suffer. There’s a number of dangers that can stymie growth beyond the regional stage if franchise growth gets out of control.

But controlled, healthy regional expansion sets you up for success at the national growth level.

National Franchise Growth Should Mirror Previous Growth

Follow the same growth patterns that got you to this point. Once you have built out a region, expand to contiguous regions, take over a coastline or dominate the Midwest. As you continue to grow from those levels, achieving national notoriety and awareness is much easier and expansion will come much quicker.

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However, the potential pitfalls are the same as those that come with unchecked regional growth, except exacerbated by the size of your franchise system at this point and the scope of national expansion. Remaining disciplined in your growth strategy that produces happy and profitable franchisees, positive validation and a strong and dependable support system will be significant in maintaining a healthy momentum.

When Emerging Franchisors can Skip a Growth Stage

Growing in concentric circles around the home market may not make sense for certain emerging franchise brands. They may employ a more aggressive strategy, such as regional or national growth, if:

  • they are well-capitalized or have experience with other brands
  • they have a lot of corporate units and are ready for aggressive expansion due to their regional or national presence already
  • they have significant capital to build infrastructure and support prior to the growth to handle a high volume of on-boarding and training and have experience with fast-growth companies

Otherwise, not managing growth and not building infrastructure will be the death of most emerging franchise brands. Many have grown quickly through outsourced franchise development companies and broker networks, only to hit 150 units and have the wheels fall off. These brands couldn’t handle the growth, the on-boarding and didn’t have the capital to support it.

Typically, though, emerging franchisors expand their brands best when they go from local to regional growth, regional to super-regional growth, and super-regional to national growth – and sufficiently supporting their franchisees along the way.

With 30 years of franchising experience and more than 800 franchise owners representing over 1,250 locations for five brands, Winmark Franchise Partners can help emerging franchisors decide on a growth strategy that’s right for them. Contact us here or at (844) 234-8520.

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