“Is this a good time to grow my franchise?”
I have had a very good experience as a franchise owner. I bought the right franchise, I worked hard to be successful. And now I have the capital to grow. But is this a good time to expand, in a time when Covid-19 seems to be going away? Or should I watch the trends and bide my time?
Thank you for your advice,
In my opinion, there has probably never been a better time to grow a business depending, of course, on the industry you are in, the competition in your area, and other considerations that you were probably already weighing before the pandemic struck.
There are considerable opportunities today. A tremendous number of businesses have closed during the pandemic, which allows the businesses that have survived to have more share of the market. Those closures have also made it easier to find good locations. So much vacant space is available, often at attractive rents.
Also, this is a great time to staff up. Lots of experienced, eager people are already looking to return to work, which means you can hire good people at a relatively low payroll cost. And on top of that, the cost of borrowing is relatively low. That is another way of saying that it is now easier to get a loan, and a more attractive loan, than it has been in the past.
So, I would say that this period of time, when the pandemic is ending, is the perfect time to expand.
Wishing you every success as you expand your franchise activities and grow,
“Should I wait for my neighborhood to improve . . . or is it time to move my franchise out?”
I bought my franchise six years ago in an old industrial city that is supposed to improve. But when will that happen? When will other businesses move in, bringing traffic and customers with them? Am I fooling myself by thinking it could still happen?
I have made modest physical and cosmetic improvements to my store, anticipating that the area will improve. But how can I know if it is time to cut my losses and move?
Terry, New Jersey
You are dealing with a lot of unknowns. But because the survival and success of your business will ultimately depend on making the right decisions, I would encourage you to consider a hard one soon. You should decide whether you are located in an area that will actually come back, or in one that will stall for a long time, or even go downhill.
How can you tell? One way is to look at business openings and closings in your area during the last five or more years. Granted, some businesses might have closed during the pandemic, but what trends to you see when you look back across a larger window of time?
Also look at trends in your area. Are any big stores or industries planning to move in? Are any closing? Are there plans for new roads, new transportation, or other improvements that could make your area more attractive for businesses? Your local Chamber of Commerce and city offices can be good sources of information. So are articles in local newspapers and online bulletin boards.
The financials of your franchise also come into play as you make plans. Are you making a strong profit currently, making a modest profit, keeping your head just above water, or losing money? If profits are falling, how long can you keep operating in the hope that the situation will turn around?
Can you cut expenses, and what impact could that have on your plans? Review the terms of your lease. If you decide to stay, you’re going to want to renegotiate. Remember that chances are good that your landlord will negotiate the terms of your lease just now, because he or she wants to make sure that you are not going to shut your doors and leave a vacant property behind. Before negotiating with your landlord, sit down with your attorney to review the terms of your lease and what might be negotiable.
Another factor to consider is whether you are a destination or an impulse business. In other words, do people travel to buy from you at your store, or do they walk through your door when they are in the neighborhood and discover that you are there? Clearly, impulse businesses are more successful when they are in areas where there are lots of other businesses that bring people to the neighborhood, or where new businesses are opening up.
Still another question to ask is, where will you go if you leave? And what advantages or disadvantages will present themselves in the locations you can consider?
Let me share another thought with you. As franchise owners, we tend to think of occupancy expenses (like rent and utilities) and advertising as completely unrelated to each other. But they are not. If you are located in a place that is out of the way and that people need to discover, you might pay less rent; however, you will need to spend more on advertising to bring people to your door. And the opposite is also true because if you are located where there is a lot of vehicular or pedestrian traffic, you will generally have to spend less on advertising in order to attract a similar customer base.
So I realize that is a lot to unpack there! I hope my comments have helped you pinpoint some of the factors you should consider. And of course, I wish you every success as you expand and improve your business in the very promising post-pandemic period that lies ahead.
Wishing you every success,
About Evan Hackel
Evan Hackel is a 35-year franchising veteran as both a franchisor and franchisee. He is CEO of Tortal Training, a leading training development company in Charlotte, North Carolina, and Principal and Founder of Ingage Consulting in Woburn, Massachusetts. Evan is the host of Training Unleashed and author of Ingaging Leadership. Evan speaks on Seeking Excellence, Better Together, Ingaging Leadership and Attitude is Everything. Evan is an active member of the C-Suite Advisors Network. To hire Evan as a speaker, visit www.evanspeaksfranchising.com. Follow @ehackel.