How to Build a Franchise Growth Strategy

Franchising is a great strategy for successfully growing a business, but it doesn't happen overnight. When gearing up for expansion through franchising, it is essential to build a franchise growth strategy and plan for both the short and long term. 

As the world emerges from the COVID-19 crisis, the time has never been better to grow a franchise, as there may be a large number of qualified candidates looking for new franchising opportunities. Here are some factors to consider when developing a franchise growth strategy.

Find Target Markets

First, franchisors need to research desired target markets and determine where they will start growth. Usually, a franchise brand will start its expansion efforts in a state where the brand originated or has already built a modest following.

“Young franchise brands need to grow around where they are based,” said Blair Nicol, CFE, vice chairman and principal of FranNet. “If a franchisor is based in Portland, Oregon, for example, the first few franchisees need to be in the Pacific Northwest to promote regional growth. A legal team can also advise franchisors on where to grow in the United States based on registration states and competitive threats — a franchisor may want to come to market faster if a competitor has plans to come first.” 

If established markets do not already exist, the franchisor should select specific markets that are best-suited for their brand or product and develop them as future validating markets. Brands also need to ask themselves how the demographics (population, income, education, etc.) match up to their targeted audience. 

“Some of the best franchisors are in the business of data collection and analytics; they need to know their target demographic and ensure that any territory they are going to expand into has enough of their common buyer,” said Corey Elias, founder and franchise consultant at Franchise Capitan. “Still, one big hurdle to beware of is solely relying on the data. Each market has unique intricacies that the brand should do their best to understand.”

Create a Timeline

There are several other timely factors that can determine when a franchise brand should attempt to enter a certain market. Overall, a decision to grow in a particular area should be based on a general timeline. For example, a market may not be ideal for the brand right now, but could be ten years down the line if everything goes according to plan. These decisions are critical if a franchise hopes to avoid wasting resources and effort in the long run. 

“Other factors that franchisors need to evaluate include the current labor force and economic outlook of a market,” said Jesse Curry, vice president of franchise development for Eat the Frog Fitness. “This will depend on the type of service you are offering. What are your needs, and what wages will it take to attract good people? More importantly, what will it take to retain your employees?”

If the business relies on vendors or any distribution, franchisors also need to make sure that those vendors currently operate in new areas of the country. “It is important for a franchisor to ensure they have enough operational support in their back office to handle the growth as they expand into more markets,” said Elias. “This will set up their franchisees for success.”

Start Looking for Franchisees and Generating Leads

Once franchisors have a general plan in place for where and when they want to grow, it is time to start getting the word out to prospective franchisees. First, a brand needs to establish what their ideal franchisee looks like. Once the profile is outlined, there are several ways for franchisors to generate local leads in order to get the brand in front of the right candidates. These include portals or pay-per-click digital marketing, brokerage groups and events organized by the International Franchise Association.

The best place to start spreading the word about the franchise opportunity, though, is through current franchisees. That is why franchisors should build a tier referral system into their growth strategy, incentivizing franchisees to refer other franchisees to the brand as the system grows over time.

“If you are building the system correctly, current franchisees will be your biggest advocates and would love to help grow the brand,” said Elias. “Finding the right franchisees is key — if you have a good franchisee who believes in the brand and has the operational and financial capacity to expand into multiple units, for example, it can be super advantageous to the overall growth of the brand.”

Healthy Growth is Happy Growth

When creating a franchise growth plan, franchisors need to develop a general understanding of why they want to grow and if they have the infrastructure necessary to achieve their goals. Overall, the worst thing franchisors can do when trying to grow is spread themselves too thin. 

“Brands need to have specific growth goals and focus on them,” said Justin Gordon, CEO of Amramp. “Pick one or two markets and commit to them. Don’t get distracted and listen to the noise of doubters or people who don’t have the brand’s best interest at heart.” 

In order to promote healthy franchise growth, franchisors shouldn’t expand just for the sake of it. The true key to creating a strong franchise growth plan, Elias says, is making sure the business model is as optimized as possible.

“Before diving into certain target markets, franchisors should dial into all the areas where they can improve, such as franchise training, staff training, hiring the right people, and improved digital and social marketing tools for your franchisees,” Elias said. “Heed the warning signals of under-performing franchisees and immediately address them before expanding into uncharted territories.”

With the right target markets, franchisee validation and marketing in place, franchisors can create a vision of growth and a solid action plan that will help the brand expand to new communities across the country and the world.