Franchises provide exciting business opportunities for entrepreneurs to follow their dreams. However, existing franchise owners will also want to expand their business in order to maintain a competitive edge and achieve long lasting financial success. Below explains how to successfully expand a franchise.
The Basics
Franchise owners who have a contract with a franchiser may want to add on another business location. However, this may result in structural and contractual adjustments. For example, there will be increased payments, but the franchise owner may be able to negotiate a better price because more operations means more leverage. If a franchise owner wants to take over another franchise operation, they must perform the due diligence of assessing the target businesses’ operations, financial records, potential for growth, historical problems and current liabilities. In fact, due diligence is sometimes a complex process that involves outside consultants, franchise representatives and financial advisers and auditors.
Regional Expansion
Part of expanding your franchise may involve opening up a new branch in a different geographical area. Regional franchise expansion can be difficult because of the local market and demographic differences. To start, franchise owners must be truly committed to repeating the same challenging experience of opening up a franchise. Next, they must choose a target area and perform in-depth market and demographic research. This should be followed by extensive research of competitors. Franchise owners should never forget that just because their business model works in their region, does not mean that it will work in the other. As a final touch, franchise owners should consider slightly adjusting their product or service to meet local preferences. For example, a restaurant franchise owner should consider experimenting with local flavors in order to offer added incentives to consumers.
Rapid Expansion
If the market demand has been consistently strong, franchise owners should consider a rapid expansion in order to take advantage of consumer preferences. There are three points to remember when rapidly expanding a franchise. First, expand within the local market area before moving to other areas. Franchise owners should review historical market analysis of their local region and also obtain factual market and demographic data of their target region. Second, allow sufficient time for organic growth because suddenly investing in more locations may actually hurt the franchise in the long run. Instead, focus on building the franchise brand and reputation. Third, and most important, be sure to perfect your business model before expanding to a different location. Continuous improvement should be the primary goal of every franchise that wants to expand their operations.
In the end, franchises offer entrepreneurs the opportunities to fulfill their commercial dreams. However, not all franchise owners will be satisfied with one store. Therefore, they should carefully plan and research their proposed expansion before taking any action.