No matter what business model you follow, expansion and growth is the name of the game.
Whether you are an independent operator or part of a franchise, smart, successful business owners need to know when the time is right—or if the time is wrong—for expansion. They also need to consider the proper way to expand.
There are many pitfalls in the business world, but perhaps none is more seductive than the pull to aggressively expand a young—but successful—concept. Don’t get me wrong, expanding can be good; it just needs to be done the right way.
One of the more popular ways to take on the concept is by franchising to owner-operators. Independent companies often look to franchising as a vehicle to take their company to the next level.
Franchising is all around us. Restaurants, auto dealers, auto repair, fitness centers, child care, and adult home care are just a few of the hundreds of franchise concepts in the United States. It is estimated that there are nearly 750,000 franchised establishments operating in the United States in 2017. Those franchises are responsible for employing more than 7.8 million people nationwide.
Franchising tends to sound easier on paper than it is in practice. There are countless elements to consider before deciding to franchise or further expand a business.
You’re only as good as the system you have in place. Consider the following:
Unexpected growth coupled with an unpolished system can spell doom for any business. A rapid increase can have unexpected consequences related to staff and expenses. How much will it cost to take on that new big account? What type of an investment will be necessary for new equipment? How many new employees will need to be hired? Know before you grow.
As mentioned earlier, growth is a necessity—but too much growth in a short period of time can backfire.
Franchisors need to be selective in vetting franchise owners. Likewise, potential franchisees need to be selective in choosing a franchise to purchase. While there are many aspects that may seem tempting to both sides of the partnership, the franchisor needs to ensure the new franchisee is a good fit for the business, and take the location and culture into consideration. Choosing the wrong candidate or the wrong franchise will set you back much further than you might expect.
No matter if you are franchising or expanding a traditional business, look at your potential team members very thoroughly, and consider the following:
Part of building a successful operation is to teach your team to “fish.” It is important to teach franchisees what it takes to grow a business the right way and how to add accounts at a steady, sustainable pace.
Franchisees or branch managers in a traditional company need to know when it is the right time to bring on additional help. Typically, franchisors will want to work with the franchisee, or business owners will work with the branch manager, to determine a monthly revenue point at which they will be able to afford bringing on additional staff.
As the operation grows, bringing on a part-time operations manager to help check in on cleaning teams and conduct quality control evaluation is recommended. Typically, this person will have the flexibility to work evenings and weekends, as needed. If the hire is a good fit, the franchisee owner may want to consider hiring the employee for a full-time general manager position when that role needs to be filled.
Ultimately, the decision about whether to expand or not comes down to conversations you’ll have with your core team, financial advisors, your family, and, oftentimes, with yourself. Speaking to existing franchisees (if you have them) or staff can help too, as they should be able to give you valuable feedback about what has worked and what hasn’t for your business.
Expanding any business—and specifically deciding to sell franchises or become a franchisee—needs to be done with eyes wide open. It is important for both sides to act with caution as the transaction comes with a great deal at risk.
Franchising can be a life-changing decision, but one that can surely pay off for both parties with the right system and support.