For a franchisor, grand plans of opening that next location always burn brightly. And if recent history is any indicator, these dreams exist for good reason.
Since 2011, the U.S. has seen year-over-year improvements in direct franchise employment, monetary output and total number of franchise establishments, per research and advisory firm Franchise Direct.
However, dreams of expansions shouldn’t mask the reality that expansion bears inherent risks. For major franchise operations, the failure of a single location may only raise a few internal eyebrows. But for smaller operations, one failed location can lead to lost credibility from investors and employees, a stumble in brand reputation among consumers and major financial woes.
Fortunately, there are a few key signs to indicate you’re ready for a successful expansion.
You’re prepared to relinquish control
At a foundational level, adding a location, whether it’s your second or seventeenth, means you’re preparing to loosen your grip and delegate some day-to-day responsibilities to someone else. After all, your time and energy are finite resources. Adding more locations means you’re spreading those resources increasingly thin.
With each additional location, your goal is to replicate and improve the same experience that enabled you to expand in the first place. This begins with a vision and having the right people in place to execute it.
There’s talent that you trust
Identifying the right point person to run the new location is paramount – whether the hire is a franchisee or store operator. Business acumen is essential, however, it’s equally important to add a team member who can extend the brand.
Each franchise location truly reflects on the parent company’s broader brand, meaning a lackluster customer experience 20 miles away can have a major impact on other, more successful locations. Thus, it’s vital you identify a leader who shares the same vision and values that make your brand successful.
Your business model may not be perfect…but it’s close
Advisors may tell you to perfect your business model before seriously considering expansion. Let’s be honest, if you’re looking for perfection, you won’t find it in business.
True, you’ll want a business strategy that’s easy to replicate and implement. However, the quest for perfection can stymie true growth. Instead, resolve minor problems before they become major problems across multiple locations. Accept that you’ll have to adjust on the fly and resist the urge to pursue perfection.
Competitors can’t match your differentiator
If you’re a barber, maybe you’ve developed a locally sourced pomade your clients love. Or take the rise of “rolled ice cream,” a Thai twist on a market without much recent innovation.
If you have something new to offer, or a unique take on a preexisting service or product, speed can help you capture larger market share before your competitors have the appropriate time to respond. However, if your solution is more of a “me too” offering, it’s worth taking the time to develop and clearly define a differentiator.
Technology is set to help, not hurt your expansion efforts
Too often, you’ll see technology chime in at number 11 on the 10 things to check off before expanding. However, overseeing multiple locations can prove overwhelming without the proper tools for the job. As you become more thinly spread, you’ll want technology (accounting, point of sale, etc.) that expands with you and provides remote management and insight capabilities.
For example, a point of sale solution may allow you to accept payments at your locations, but it can also be used for advanced reporting including inventory levels, customer trends and more. Ultimately, you want your technology to inform your holistic oversight and help you make the decisions necessary to successfully manage your expansion.
You have the financial support for organic expansion
Finally, never force growth. Success stories rarely begin with the expansion of a struggling operation. Particularly for franchisors with smaller operations, achieving profitability before opening an additional location remains key, as it validates your desire to expand.
Also, it’s essential to carefully chose how you’re going to fund your expansion. Cashing in on investment capital may propel your short-term goals, but it can also restrict your freedom in the long term. Instead, driving growth organically can help you grow your footprint with less caution tape for the future.
So whether it’s getting ready to hand over the reins to individual operators or making sure your technology portfolio supports you, it’s important not to rush growth. And with the U.S. being franchise friendly at the moment, you may find it difficult to pace your expansions and examine the areas mentioned above. However, if you do, you’ll soon find your burning desire to open that tenth location will give way…to a desire to open an eleventh, and then a twelfth.
From mobile software founder to CTO of Microsoft’s Operator Channel, Chris Poelma has spent nearly three decades developing innovative, high-growth businesses in the technology industry. In April 2015, Chris joined NCR Corporation as President and General Manager of NCR Silver. He oversees a very talented and ambitious team to drive business model innovation for small businesses through its cloud-based POS platform, NCR Silver.