One of the key decisions in any franchise expansion strategy involves targeting markets for initial franchises. For an emerging franchisor, franchise expansion options will almost always mean establishing initial franchises in markets close to home. Here’s why:
1. It is easier, less expensive and more efficient for a franchisor to train and support franchisees in markets close to existing operations. It also allows the new franchisor to use existing staff for initial franchisee support functions until system growth justifies the addition of franchise support staff.
2. Logistical and supply chain issues will require less in the way of adaptation.
3. Leveraging off existing suppliers can help the franchisor realize improved purchasing economies.
4. The real estate and construction process is simplified and you can leverage off of your local market knowledge.
5. Your brand will have more recognition in nearby markets both among customers and potential franchisees. This marketing head-start should give your first franchisees a better chance of success.
In our franchise consulting practice we have certainly seen successful exceptions to this strategy. For example, market demand for a new concept may require an aggressive expansion across multiple markets and some franchisors are adequately staffed and capitalized to succeed at this. Existing franchisors developing a second or third concept can leverage existing operations, including franchise support staff, to succeed at expansion among more distant markets.
Whether franchising close to home markets or further out, sound strategic planning is essential.