How To Find the Right Target Market for a Franchise

As a franchise brand grows, one of the most important factors is deciding where to focus expansion efforts. While finding the right franchisees may be step one, finding the best locations for franchisees is another question entirely. 1851 Franchise spoke with experts in the franchise development field to discuss what franchisors should keep in mind when deciding where to grow in 2021. 

What Makes a Good Market?

Whether a retail concept or an in-home service, there are a couple of factors that can determine if an area is a strong growth market for a franchise. 

“First, research the desired markets and determine if there is a need for your offering or business model. If the answer is yes, then proceed with exploring the demographics,” said Jesse Curry, vice president of franchise development for Eat the Frog Fitness. “How do the demographics (population, income, education, etc.) match up to the brand’s targeted audience? Simultaneously, and especially in today’s environment, do thorough research on your competition in the targeted markets. Find out what differentiators you have or can easily implement. For example, on demand video, drive through lanes, 24/7 access, offer in-home services, stand out pricing, customer service, rewards program or other defining characteristics. If allowable, secret shop them yourself or hire an agency, especially if targeting multiple markets in a region.”

Corey Elias, founder and franchise consultant at Franchise Capitan, agrees that the primary factor is ensuring there are enough qualified households to buy the product and make the franchisee successful. “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 Elias. “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.

According to Curry, there are several other factors that can determine a good market for growth. “Other factors that come to light include the labor force and economic outlook,” he said. “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?”

When it comes to choosing a specific area or site, franchisors should also consider consumer traffic patterns. ”Is there an on and off-ramp or ease of getting in and out of the business park? Does your business cater to day, evening or both traffic opportunities? In most retail businesses, it is all about location, location, location,” said Curry. “With online shopping, COVID-19 and possibly a depressed real estate development period, suddenly today’s real estate environment can favor the tenant and save thousands of dollars over the life of the lease.”

What Should Franchisors Should Be Wary About?

In terms of common mistakes that brands make when growing, Curry mentions that franchisors shouldn’t expand just for the sake of making business headlines or boasting to friends and colleagues. “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, improved digital and social marketing tools for your franchisees,” he said. “Heed the warning signals of under-performing franchisees and immediately address them.”

In addition, franchisors shouldn’t 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.” 

If the business relies on vendors or any distribution, franchisors also need to make sure that those vendors work in the new target markets. “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.”

How Franchisors Can Spread the Word?

Once the target markets are identified, franchisors can implement several strategies to get the word out for both consumers and prospective franchisees. “Building brand recognition in a new market is a cross-section of luck, referrals, excellent business practices, digital and local marketing, remnant radio, high customer promoter scores, great food, excellent service, partnering with like businesses, community involvement and more,” said Curry. “When entering a new market, franchisors need to find the one significant thing (or more) that separates their brand from the competitors, and promote that. That’s what customers are looking for: differentiators.”

According to Elias, the best place to start spreading the word is through current franchisees. “If you are building the system correctly, current franchisees will be your biggest advocates and would love to help grow the brand,” he said. 

Lastly, Elias notes that once markets are established, franchisors should also involve the great groups of franchise brokers who can find and advocate for amazing candidates in a certain area and help to match them with great brands that fit their lifestyle and financial goals. In addition, brokers can guide franchisors and show them where there is a high level of qualified candidates or potential for growth. 

With these tips and strategies, franchisors should be better positioned to go out and find the markets where their brands will thrive.