I have worked with many single-store operators that have created a niche brand for their concept.  Some have been in business for several years and seemingly will ask me my thoughts on whether their concept is “franchishable”.  I tell them that is a complex question and there are several aspects to consider but if they can pull off a franchise, the upside can be very compelling.  But they need to be able to walk the walk. 

A multi-store franchise can create a larger, broader compelling brand that can attract new customers simply due to proximity and familiarity.  When done correctly, a franchise can create cross-store customer ambassadors that will go out of their way to let others “not in the know” all about your concept.  This groundswell of interest can only occur if your concept is operational stable and a crafted, established brand.  Franchising involves not only honing the operations at one location but being able to replicate and monitor operations at multiple locations.   

When looking to franchise, one should consider what the competitive playing field is (you don’t want to launch a concept that won’t fit a need) and whether you have the resources – both monetarily and with people – to be able to build and maintain a successful franchise.  There are many considerations for a budding franchisor, and here are some of the most challenging: 

Systems and Procedures:  It all starts here.  If your systems and procedures are not tight and documented, you can forget about franchising.  I can’t tell you how many franchising conversations end here, because the concept owner has all their systems and procedures “in their head”.  The franchise, if offered, will crumble once you open your first franchise location since you will not have a way to maintain the integrity of the brand – both from a consumer standpoint and a legal perspective.  In addition, you must have quality human resources to implement your systems and procedures both in the concept location as well as every franchise location. 

Location Development:  In an ideal world, the franchise system would revolve around the concept location and branch out from there.  Developing the franchise footprint in a contiguous manner will help the overall success of the franchise on several fronts which I will detail below.  Unfortunately, this strategy requires two key items:  a) plenty of capital to exhibit discipline in franchise selection; and b) an understanding on how geography will play a very important role in the overall success of the franchise.   Growth for the sake of growth by the franchisor may be great in the short term but always comes back to bite the franchisor in buybacks or unit closures. 

Operations:  Which leads me to operations.  Imagine a scenario where the franchisor has 20 franchise locations all in one state compared to a franchise that has 20 locations in eight states.  Which would be easier to manage operationally?  All too often, new franchisors are afraid to say no to new franchise fees and accept dollars from anyone no matter where they are.  It becomes a challenge to maintain operational excellence when franchise operations are spread so thin (especially if the states are non-contiguous).   In a short time, the franchise becomes “everywhere and nowhere”. 

Distribution:  Distribution can become a challenge as well, if the units are spread out too much.  In one of my former corporate roles, we had about 180 locations in 39 states that required us to have upwards of thirteen (13) different distributors.  This was a very complicated outcome for spreading the units out geographically and it became even more cumbersome when we launched a proprietary line of potato chips.  For the stores that had a density of stores in their geography, they had the volume to maintain a reasonable cost per bag of chips as well as hitting minimum ordering thresholds.  For the outlier stores, in some situations they needed to buy a ½ truck minimum at a premium price that eroded their gross margin and put them in harms risk of not being able to sell the product off the truck before they expired. 

Marketing:  Lastly, the brand becomes increasingly stronger if there are more stores in a geography helping to remind the customer of their existence.  Not only are costs of advertising and marketing spread across more stores if they are all located in the same Designated Market Area (DMA), but the impact of that brand activity can positively influence all stores.  It is the ole “a rising tide lifts all boats” adage.  Customers constantly need to be reminded that you exist, so making your dollars go further with a tighter geography of locations helps the cause. 

Embarking on a franchising strategy can be an excellent way to expand your proven concept exponentially if you have your ducks in a row.  I always caution potential franchisors to ask themselves if they would buy into their concept if offered.  Would they feel comfortable with the leadership; the capital-backing; the location development strategy; and an operational process that could be emulated for success.  There are no shortcuts in franchising and the ones that think there are, will pay the price in the future. 

 Want more ideas?  For more information on Gray Cat Learning Series, visit: https://www.graycatenterprises.com/gray-cat-learning-series