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New Franchisors Need to Manage System Growth

Guest post by: Ed Teixeira

Article Overview: When developing a new franchise program, franchisors need to manage the sale of new franchises. Franchises should be sold with a well designed strategy, that reflects the ability of the franchisor to service and support new franchisees. If the franchisor is based in Dallas, they shouldn't start selling franchises in New York or Florida, unless they have a unique and fairly simple franchise concept, which requires little or no support. It's equally important for franchisees to have the ability to successfully penetrate a new market. One or two locations in a market may not be sufficient to establish strong brand recognition.

New Franchisors Need to Manage System Growth



When developing a new franchise program, franchisors need to manage the sale of new franchises. Franchises should be sold with a well designed strategy, that reflects the ability of the franchisor to service and support new franchisees. If the franchisor is based in Dallas, they shouldn't start selling franchises in New York or Florida, unless they have a unique and fairly simple franchise concept, which requires little or no support.

It's equally important for franchisees to have the ability to successfully penetrate a new market. One or two locations in a market may not be sufficient to establish strong brand recognition. In most cases, this means franchise growth should develop from the base of operations out. A number of well respected and highly developed franchise companies, like Panera bread and Dairy Queen will not enter a market unless a franchisee can open a minimum number of locations. They recognize the need to cluster locations in a market, rather than have a franchisee with one location struggle for sales.

When starting a franchise, most start-up franchisors face the temptation of accepting every qualified franchise lead and then pursuing each one to closing. If the franchisor is following a regional development strategy, whereby the developer will shoulder some of the administrative duties of the franchisor, granting franchises over a broad geographic area can be less of a problem.

However, in most cases a start-up franchisor is selling unit franchises rather than using regional developers. In this situation, the challenge is how to control franchise candidate leads? In addition, there is the potential of losing a good candidate from a geographic area beyond the service capabilities of the new franchisor. Here is a simple strategy which can help to answer these questions and a few more.

• If you want to control your leads maximize your web site to generate leads. Cost-per-click programs through Yahoo and Google can direct leads to your web site in an efficient and cost effective way, with the capability to control the source of clicks to regions or States.

• Establish market priorities and stick to the plan. If it's necessary to have a minimum of 3 or 5 locations in a specific market then build your franchise sales strategy and lead generation programs around this approach. Consider using franchise brokers to work those specific markets.

• Use local advertising such as a major newspaper or other local publications to generate leads. As an example, an ad in the Sunday New York Times Biz Op/Franchise section can be placed for as little as $300-400 this strategy can limit your lead generation to a geographic area.

• If the franchise lends itself to regional development consider using that strategy for markets that are a considerable distance from corporate headquarters. This allows for unit franchises to be close to headquarters, while those a distance away can be serviced by a regional developer. The regional developer can be responsible for training and support.

• Consider District Managers who can work from a home based location. They can be a valuable resource for franchise prospects and new franchisees that are far away from your corporate base.

If you have a simple franchise concept which requires very little support your expansion strategy can be flexible. However, if your franchisees require support and compliance audits, be careful to avoid out- distancing your resources.

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Article Tags: brand recognition, franchise concept, franchise program, franchisees, franchises, franchisor



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