Franchising is a great way to grow a business. There are generally 3 reasons why a business would franchise.
Time, People and Money
- Capital. A business can expand using other people’s money without equity or debt. The franchisee is responsible for the entire start up investment. They sign the lease, hire staff, and working capital to operate.
- Highly motivated management. Franchisee is motivated by the fact they are owners in this business, their own capital is invested.
- Time. Looking to grow and see a market opportunity but don’t have the resources to expand as fast as you would like. The franchisee will free up your time because they are doing lease negotiations, hiring, and doing local marketing. By leveraging other people’s time and money a business can grow and expand faster than if they tried to go it alone. Not every business should become a franchise, however, if your business goes down that path, here are few things to consider.
Interview, Don’t Sell
A business that considers franchising as an opportunity to “sell”, might end up with the “wrong” franchisee. A mutual qualification process is not the same as a sales process. Just like interviewing to hire for a job, franchisors are not selling but interviewing prospective franchisees. This subtle mindset shift from selling to interviewing can have a huge impact on the success or failure of the franchise.
A major objective of a franchise is to help the franchisee succeed. In order for the best opportunity of success, Franchisors need to select the “right” territory for the “right” people who have adequate capital and skill sets, and are sufficiently motivated to succeed.
Know the Investment Costs
The franchisors need to be fully committed to franchising as a means of expansion, including the financial investment required.
Depending on how aggressive a business wants to grow, there are costs involved with expansion. Franchises need to develop good quality marketing materials and invest in proactive franchise marketing, not just put a link on their homepage saying Franchise Opportunities.
Additional costs to consider are developing quality operations manuals, as well as investing in a territory mapping service.
Develop a Rock Solid Plan
Franchisors, as entrepreneurs, have a “ready, fire, aim” mentality. They tend to shoot before they aim. Maybe they got a random inquiry off their website about a franchise, or someone told them they have a good idea, and start down the path of developing into a franchise without first planning. Interest is a good indication of a saleable business, but without proper planning, unforeseen snags are likely to derail the idea.
“If you don’t know where you are going, any road will get you there.” ~ Lewis Carol
Planning allows a franchise to grow in a manner that best supports their franchisees.
Planning helps to better understand:
- what they need to do for creating a franchise,
- who they need to hire,
- when to hire,
- how much to pay staff,
- figuring out which markets they should attack first,
- where they need to spend their capital, and
- mapping the territories for most equitable opportunities for their franchisees.
Giving Franchisees Equitable Opportunities
Franchisees are highly motivated to become successful business owners and are evaluating your franchise as a means of reaching their dreams. One of their criteria in selecting their next business is the available exclusive territory opportunities.
A common complaint comes from franchisees of large franchise systems; where franchisors sometimes allow the establishment of additional franchises in close proximity to existing franchisees. Optimal franchise territories creates a win-win scenario for both the franchisor and its franchisees. The better franchisors focus on earning income through the operation of the franchise and the royalties generated through franchisee sales rather than cannibalizing franchise territories by selling new franchises into them, when the addition of a new franchisee will not increase the level of franchisee sales at all.
GeoMetrx provides franchisors the ability to:
- Easily design territories with data
- Create maps and report outputs to share with others including franchisees
- The Alignment Panel enables you to dynamically build territories on map
- Optimize large areas to build equitable territories quicker
- Provides a Macro & Micro view of your Districts / Regions / Territories in order to visualize better
Traditional territory mapping by zip code, geographic radius, or driving time tells a one-dimensional story whereas GeoMetrx provides a deeper interpretation for faster, more profitable decision-making.
Remember, Franchisors fail when their Franchisees fail.