Franchising your concept can take a lot of work and reflection. With more than 15 years of investing and advising in a variety of industries, I’ve learned several areas that businesses need to consider before starting to franchise their concept to increase the odds of success. These steps have guided franchisors I’ve worked with to the opening of nearly 1,000 successful new franchise locations.
Economics and support
A successful franchise is built on a foundation of strong unit economics. While you can potentially sell franchises without this early on, the franchise will soon stagnate or even shrink as failing units close, and the struggles of existing franchisees dissuade potential future franchisees.
It’s also important to understand that, as a franchisor, your role is going to change. Your job becomes finding the right franchisees and then providing them the tools and support team to enable their success. It’s no longer “running units.” Unit economics and the right support infrastructure should be table stakes in starting to franchise.
Culture and branding are key
A brand needs to understand how they are differentiated from competitors and the culture they want to build. A franchise system is dependent upon systems and processes to maintain the distinctiveness of the brand and culture, so the critical non-negotiable elements need to have been defined in advance and be integral to franchisee onboarding and training.
Potential franchisees look closely at the culture of the brand and want to partner with a franchise that matches their personality or the team they plan to hire. They need to know if your concept is fun and casual, professional and fast-paced, or passionate and customer-service oriented. Early on, a potential franchisee will visit locations and meet the franchisor team. If their experience of the brand and culture doesn’t match the “story,” they’re likely to look elsewhere.
Don’t settle if they’re not a fit
Establishing your brand and getting ready to franchise takes a lot of work and resources. Once you’re finally ready to franchise, potential franchise candidates may come from all over. It’s critical to be selective and to make sure the individual you’re engaging with is the right fit for your concept. Are they passionate about your brand? Do they match the characteristics of your ideal franchisee? Are they all-in or over-stretched with other priorities and commitments to other brands? Do they meet your financial qualifications? Additionally, while early franchisees are, by definition, more entrepreneurial, will they still be willing to follow the protocols that you’ve set as critical to your brand?
Geographical priorities are extremely important
Just because your brand is regionally successful, it doesn’t mean it will have national appeal or beat out other regional players. The most successful franchisors spend significant time and effort understanding where their brands compete best. Understanding your market and targeting the right geographical regions, and within those the right sub-markets, will help franchisees and therefore the franchisor be successful.
Depending on the concept, expansion into adjacent markets or states can make most sense initially; it’s much easier to build out a support infrastructure (and supply chain) for franchisees when there is some geographical concentration.
Word of mouth can’t be the only marketing tactic
Investing in marketing efforts can make a big difference for brands trying to expand. In my experience, spending money on multiple marketing efforts is key to driving leads, whether it is through public relations, social media, digital advertising, content marketing or trade shows. However, there is no silver bullet. Successful marketing differs by brand because the target audience varies from concept to concept, and therefore how to engage with them. Expect to iterate and for some efforts to fall flat, but over time you should be able to refine the marketing efforts to achieve results.
Most brands put a lot of focus into opening marketing, and it’s certainly important. However, a marketing plan should continue; what happens in week 2, week 6, week 12? Also, make sure your customers’ first experience is a great one. The last thing you want to do is spend heavily on marketing to get people to come in and then not have the operations in place. You get one chance to make an impression, so make it count.
Systems and processes are essential
Having processes and systems in place is one of the most fundamental roles of the franchisor and is how you support your franchisees. Streamlining processes and systems means that the same task is being done the same way each time. This allows your brand to scale while maintaining consistency and quality. There is so much involved in opening a new business. The goal should be to simplified wherever possible (e.g., preferred vendors, operations manuals, brand standards, marketing plans) and with processes and systems in place, the new business owners can focus on the most important things: building their team and their base of customers.
The quality of support can be a real differentiator in attracting franchisees. Franchisees want to see a path from new owner to flourishing franchisee. The processes and support systems are the roadmap for them to follow.
Adapting is critical
When the COVID-19 pandemic first began in early 2020, restaurant owners nationwide knew that in order to survive, adaptation was key. But even before the pandemic, our team has always focused our brands like Slim Chickens and Walk-On’s to evaluate trends in their segment. Mobile ordering is one example; this option had seen a steady increase in demand before 2020, but COVID brought it to the forefront of innovation. Restaurants that grasped on to the trend and made deals with third parties, or better yet created their own apps, found themselves ahead of the curve that others had previously regarded as optional.
During the pandemic we also saw many restaurants adapting in ways they might have never imagined, such as curbside pickup. Convenience has become an essential expectation for consumers and, going forward, the expectations of restaurants will be even higher. Being able to adapt will determine which brands will flourish.
Morven Groves is Vice President of 10 Point Capital and has spent over 15 years investing and advising in travel and hospitality businesses, with 10 years focused on franchising. She is passionate about growing brands in the right markets with the right partners.