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Why Consider a Franchise Model for Growth

Businesses ready to grow have to consider the best strategy for expansion. With the advantages franchising offers, it’s easy to see why so many enterprises elect to utilize the franchise growth model. Each year, 300 new brands start franchising.

Here’s why franchise expansion is so appealing:

The Franchise Model is the Road to Rapid Growth

Opening additional corporate locations on your own takes a lot of time, energy, capital and other resources. But, franchising your brand allows you to expand quickly. You can open new locations in multiple markets with individuals you deem qualified to own a franchise and represent the brand. By selecting franchisees to own and operate locations, you are freed up to continue expanding your business to additional markets.

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At the same time, you want to make sure each franchisee is as successful as possible. You must still provide pre-opening, grand opening and ongoing support. By doing this, you increase the likelihood of existing franchisees choosing to open more locations in their markets – and possibly beyond.

Franchise Growth Leads to Increased Brand Recognition

It’s not a coincidence that the largest franchise brands are the most recognizable ones. Franchising provides you with the opportunity to grow a single location into a well-known brand locally, regionally, nationally and even globally. When you expand your business into new markets, more consumers will become familiar with it. This drives revenue for franchise owners, who may decide to open more locations. Eventually, your brand could dominate the market.

When you have franchisees who are financially qualified, passionate about the brand, possess a strong work ethic and respect your vision, they help build your brand reputation in their communities, too. A popular brand with a good reputation drives sales and ultimately brand growth.

You Don’t Manage Every Location

While you provide support to your franchisees, each franchise owner is responsible for hiring and conducting business according to brand standards. The success of their locations is ultimately up to them.

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Franchisees have skin in the game, so – if you have the right partners – they will run a successful business because they’re local entrepreneurs with their own reputations to uphold. Because they own the business, your franchisees may out-sell, out-produce and out-manage a corporate employee because of their vested interest in the franchise.

Your Franchisees Help Drive More Unit Sales

Happy franchise owners beget more franchise owners. When franchisees are happy because they’re treated well by the franchisor and their locations are profitable, they’re usually willing to tell other entrepreneurs about the brand’s franchise opportunity. That positive validation has a significant impact on franchise sales. Although you should still work on generating interest among potential franchisee candidates, happy franchisees are instrumental in speaking positively about the franchisor and brand.

Questions to Ask Before You Get Started

With all the advantages franchising offers, it’s no wonder so many businesses consider using the model to grow. But, before you begin franchising, your business must be sound and in order. There’s a lot to consider. Here are some of the fundamental considerations:

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Is my business ready to grow through franchising?

Here are eight questions to ask yourself to help you decide. If you answer yes to all, your business may be ready. If you answer no, you have some work to do before taking the franchise plunge.

  • Are your corporate locations profitable on an individual location basis?
  • Do you have multiple locations in multiple markets?
  • Is your business model replicable?
  • Have you determined the differentiators that make your brand unique?
  • Is there a reasonable demand for the product or service you offer?
  • Will franchising provide an adequate return for you as a franchisor?
  • Are you ready, willing and able to commit to the level of support you will need to provide value to franchisees and to the system?
  • Are you prepared to spend the necessary money to enter franchising properly capitalized and prepared?

Will I make a good franchisor?

Small business ownership and being a franchisor are two different things. Small business owners often have day-to-day oversight of all locations. As a franchisor, you will lose that responsibility because it becomes the duty of each franchisee. You may be more involved in the strategic vision of the company or the sales process for potential new franchisees. If you’re unable to delegate tasks and can’t give up some control, you risk stunting the growth of your franchise. Not all entrepreneurs make good franchisors.

Do I have enough capital to get started?

In order for franchises to generate revenue, franchisors have to invest a lot of money to develop and put systems in place, create manuals and legal documents, assemble a franchise development team, and more. It’s not uncommon for emerging franchisors to run out of money after only a year. A safe rule of thumb is to acquire at least twice the amount of start-up capital you had originally planned to be fully prepared to spend where needed.

What growth strategy should I use to grow my franchise?

Emerging franchises typically focus on selling a single unit to a single entrepreneur at a time or they go for multi-unit development strategy. There are pros and cons to each strategy.

Using a single-unit strategy is simple and easy, and works well for owner-operator franchise concepts. There’s relatively little risk awarding one location to a new franchisee with little or no business ownership experience. This strategy allows the franchisee to prove his capabilities before the franchisor decides to consider him or her for additional locations. Although safer, it’s also a slower way to grow your franchise system.

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Using a multi-unit development strategy, franchisors award at least three locations (usually more) to a single franchisee, who agrees to open all within a certain amount of time set by the franchisor. This is a quicker way to grow (provided the franchisee can open all the agreed-upon locations in the designated time) and an efficient way to fill out markets.

Whichever strategy you use, you can exercise more control over your brand’s growth by expanding in concentric circles around your home area. Emerging franchisors can then level up with regional and national growth.

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 businesses decide on a franchise growth strategy that’s right for them. Contact us here or at (844) 234-8520.