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Expanding Franchisee Advice

Expanding Franchisee Advice
Author: Lance Winslow

Franchisor expansion policies are not as simple as one might think. On the mind of every businessperson is the idea of expansion. We think we will make more money when you expand to a second, third, fourth, etc. unit, store or work truck. So you would think if you are franchisee of a large franchise system that the franchisor would want to help you into that additional outlet as soon as possible or, like some franchisors, much sooner. After all they will make more royalties and have an additional unit or push pin on their map of the country or state. The franchisor’s goals are actually more complicated than that. Our goal is your success-profit-happiness. Running an additional unit can create tremendous amount of headaches, which a franchisee may or may not be ready for.

Most franchisors have simplified this process of expanding for their franchisees. It does take time however. For instance:

Training of a manager

Hiring of crew members

Scheduling modification

Finding a good lease

Modifying the location

Installing the equipment

Increasing the percent of new customers

Setting up a labor payment programs

Grand Opening Marketing

Vendor Notification and Logisitics

And this is just the start. Some franchisors want to see the franchisees other unit or original unit busting at the seams first. Some even recommend that you have a minimum of 1.5 times what a typical unit in he franchise system does adding units. If your unit or outlet is failing it makes little sense to dig a deeper hole. Get the problem first, then fix it. In other words, get too much business, then expand. Don’t expand into the next unit until you have enough business to support both with the first one. This is one reason franchisors often have different policies for corporate franchisees and individual franchisees.

A large corporation can absorb the expansion costs without taking money out of the profits of the existing units. Not every new franchisee going into franchising today understands this, but it is something you should know and think on.

By Lance Winslow