Your Brand vs. The Unicorn Brand: The Gap Nobody Wants to Name

Some franchise brands seem to build momentum while others struggle to get the flywheel moving. During a webinar ahead of FranCamp Miami, GoodSpark Franchise Growth Accelerator CEO Charles Internicola and Chief Strategy Officer Nick Powills discussed what they believe separates a potential unicorn franchise brand from a system that is simply selling franchises.

Internicola framed the path around four stages: becoming a local hero, proving the business can be replicated, creating franchisee demand and reaching institutional momentum. But getting through those stages requires more than capital or franchise sales.

"I can have all the capital in the world," Internicola said. "If my franchisees aren't validating, if we're not hitting our unit economics, or if we don't have good consumer positioning, it doesn't really matter."

Positioning Has to Come Before Growth

One of the first requirements is clear B2C positioning. A brand should be able to explain not only what it does, but why it matters and what separates it from others in the category.

"If you don't have a positioning, you don't have a point of differentiation in the marketplace," Powills said. “You're already playing from behind.”

He pointed to brands that had struggled to gain momentum until they changed how they positioned the opportunity. In one case discussed during the conversation, a sizable brand had success outside the United States but was struggling domestically because its franchise opportunity was positioned toward a very specific buyer. When the company changed its value proposition to speak more clearly to a broader franchise buyer, Powills said the situation began to change.

"They could sell them. Then they were getting them open. They were performing to expectations, and they were scaling," he said. “They were not stuck globally, but they were stuck in the United States. ... All that work had to be done.”

Brands should address that positioning before spending heavily on franchise sales or marketing. Running advertisements or attending broker conferences without a compelling "why you, why now" message can mean spending money before the foundation is ready.

Franchisee Economics Matter More Than Franchise Sales

Franchise sales alone do not create a strong franchise system. The more important measure is whether franchisees can open, perform and build businesses that match the expectations set before they signed.

"Great franchise systems are not built on franchise sales; they're built on unit economics," Internicola said. “They understand they’re going to sell franchises, but it's the performing franchisees that grow the system.”

Problems start when the performance used to sell the opportunity does not line up with what franchisees actually experience after opening. That gap becomes even more damaging when someone signs a multi-unit agreement, opens the first location and then cannot move forward with the rest of the development plan.

"If you're using your Item 19 to weaponize your brand, but the realities don't align with what you're weaponizing your brand with, then what happens is the franchisee comes in on a multi-unit deal, barely gets Unit 1 open and stalls out," Powills said. “Stalled-out franchisees kill the unicorn. Period. End of story.”

That is why franchisee unit economics need to come before aggressive franchise sales. A brand can continue selling agreements, but if existing franchisees are not performing, the system will have a harder time creating the kind of momentum needed to scale.

Strong franchisees can also become multi-unit owners, creating more growth inside the existing system. Instead of constantly relying on new franchisees to add locations, a franchisor can grow alongside operators who already understand the brand and have demonstrated that they can perform.

"Successful franchisees scale," Powills said. "Successful franchisees are worth more to your bottom line. A franchisee who owns two, three, four, five, six, whatever the unit count is, is going to pay royalties on each of those locations."

Expectations Need to Match Reality

Creating the right expectations during the franchise sales process is just as important as having strong unit economics. Franchisees should clearly understand what they are buying and that the numbers used during the sales process should accurately reflect the opportunity.

"I don't want to just generically say franchisee unit economics," Internicola said. “I want to say there's alignment between why the franchisee bought and what the franchise system delivers.”

That alignment can look different depending on the business model. A supplemental-income franchise, for example, should be presented that way from the beginning so franchisees understand exactly what to expect. Problems arise when the opportunity is positioned one way but delivers something different after the franchisee opens.

"Own your economic positioning, create transparency and then take every step to help your franchisees overperform," Internicola said. "If you're a supplemental-income business and that's all you promised, or that was the expectation, then no one's going to be upset they're not replacing their income."

Franchisee Support Has to Be Built Around Performance

Leadership teams should measure success by franchisee performance, not simply by the number of franchise agreements sold. Long-term growth depends on helping owners perform well after they open, giving them the support they need to grow their businesses.

"There are too many brands that over-index success on selling franchises, and not enough brands that index on the success of the franchisee," Powills said. “Successful franchisees scale. Successful franchisees are worth more to your bottom line.”

Support also extends beyond operations and into marketing. One example discussed was a franchise system that required franchisees to spend about $5,000 per month on marketing through the franchisor. The reasoning was simple: many franchisees are willing to invest in marketing, but they do not always know what to spend, where to spend it or what kind of return they should expect.

"They don't do it, not because they don't want to," Powills said. “It's because they don't know how, and there's nobody being prescriptive about, 'Go spend X, and this is what your return should be.'”

Helping franchisees budget appropriately for customer acquisition and providing ongoing coaching were also identified as critical responsibilities for the franchisor. Building leadership capacity around franchisee support can help owners exceed their unit economics while creating the foundation for long-term system growth.

AI Can Help Brands Refine Their Positioning

Artificial intelligence can be a useful tool for franchisors that are struggling to clearly communicate what makes their brand different. Rather than replacing strategy, it can help leadership teams rethink their messaging and identify stronger ways to describe their value proposition.

One example involved a garage flooring company. Instead of positioning the business around epoxy floors, the AI suggested reframing it as a premium garage transformation company, shifting the conversation away from a commodity service and toward a broader customer benefit.

“AI can be a support mechanism for helping you get there if you know what questions to ask," Powills said.  

The exercise also illustrated that refining a brand's message is about more than marketing. A stronger positioning can help leadership better define what the business is building and the value it delivers to franchisees.

What Can Derail a Potential Unicorn

One of the biggest risks for an emerging franchise brand is a disconnect between what franchisees expect when they buy into the system and what they actually experience after opening. That misalignment can slow growth even when the concept has strong potential.

"What would derail them would be a disconnect between the franchisees they onboard now and their economic expectations," Internicola said. “I want to say there's alignment between why the franchisee bought and what the franchise system delivers.”

Addressing that challenge starts with making franchisee unit economics the top priority, followed by strengthening the leadership team with more coaching and support for franchisees. While capital is still important, it should come after those fundamentals are in place.

"I think the bigger issue is not the capital," Internicola said. “It's the brand positioning. It's the unit economics. It's the franchisee transformation.”

Brands with the strongest long-term potential are the ones that focus first on clear positioning, realistic expectations and helping franchisees succeed after they open.

"You better have a positioning. You better be telling the truth in your numbers so you're setting expectations properly," Powills said. “Your leadership team needs to be excited and aligned around the success of the franchisee.”

Watch the webinar above or on YouTube.

For more information on GoodSpark and its services for developing franchises, visit https://www.goodsparkfranchise.com/.