In a world where many franchisors measure their franchise sales through franchise fees, the deals you sign this year will impact your cash flow this year. But, for smart franchise brands, you are selling for 2020, as you know it will take six months to generate leads, another three months to close and then a year to get that unit open. The cash flow that will really impact your business won’t activate until 2020.
In today’s competitive growth world, real estate is depleting – especially the good spaces. This is adding time to the development process, as new franchisees of brick and mortar brands have to wait for other locations to cycle through before finding the right location for them.
Because that time cycle is being extended (with more businesses signing extensions), your brand should really start thinking about a 36-month growth strategy versus a 12-month plan.
While this may be challenging for projections, an extended timeline will do the following:
- Provide more flexibility for the sales team to identify the right franchisees who can scale within your brand.
- Provide more room for your real estate and construction teams to not settle on location.
- Help project future revenues on a larger cycle.
- Leverage future revenues for more use in a current growth cycle.
- And most importantly, prepare for when the next event hits.
Even for non-brick and mortar brands, an extended growth strategy will help with projected revenues. The trick is to make sure you have strong measurable milestones along the way to ensure you are hitting targets. You need to also watch analytics carefully to measure the value of the execution of your marketing plan.
Regardless of whether you change your growth strategy or not, make sure you study what happened to franchisees who selected secondary real estate in the last recession. Those units and businesses were the first to close. Closings really set brands back, meaning the work you put into your locations to ensure protection during the next event will be vital to your brand’s ability to win through another economic downturn.
Don’t look at the short term in any of your growth and real estate decisions. Understand that what you do today will add great value to what happens to your brand in the future. Thus, high-level executives should make sure their teams are looking at a longer cycle in order to win.