Having worked as a consultant at Technomic, the leading foodservice research and consulting firm for nearly a quarter of a century, one comment has been consistent; “How can I successfully develop my restaurant business? “
From the small independent operator who wants to develop and open more units to the regional chain which seeks to develop outside its local comfort zone to the large chain operators who have already developed but are looking to accelerate, the franchise always does. part of the conversation.
Franchisees often struggle with strategy because their strengths lie in managing restaurant operations, not managing growth. They are very different skills. So here are some key commonalities that I have observed over the years that successful operators have employed to grow their franchise businesses:
- Be ready. Describe a step-by-step approach to site selection, construction design, equipment, interior design, signage, training manuals, pricing guidelines, local marketing strategy, and operational procedures for the front and back of the house. Most operators run their businesses without these written guidelines, so this step can be overwhelming but crucial nonetheless.
- Take a cautious approach. Don’t grow too fast. Opening profitable stores is the key to long-term success. Failure means store closings and negative customer sentiment for your brand.
- Create an economic unit and strong partners who will support your business. This means careful selection of suppliers, distributors and service providers who have an aligned strategy, serving your industry with the ability to work hard to support your business. The infrastructure for franchise operations is essential to run a franchise with few distractions.
- Qualify your franchise. Best Practice Operators select and approve franchise candidates with experience, capital and, most importantly, a passion for catering. These requirements are not negotiable. Applicants seeking a career change or retirement are not well suited for hospitality. Look for a restaurant experience that is looking to move from working in a restaurant to owning one. Focus on multi-unit franchisees versus single-unit operators and look for area development agreements with experienced leaders.
- Spend the appropriate time with franchise partners, helping them select the right real estate partners, identifying the best locations and giving them advice on what constitutes a good lease.
- Train, train and train again. It is an essential ingredient for a franchise to have the proper education and preparation. Opening a store is just the start. Then it’s about breaking even and generating profits. Good franchisors spend quality time with each new opening and only leave when operations are running smoothly.
- Make sure there is a customer feedback loop to make sure your franchise follows protocol and builds customer satisfaction with a plan to drive positive online reviews.
- Finally, stay engaged and support your operator. Provide positive and constructive feedback on key areas of success and step in as needed to lend a helping hand. Listen to your candor and do your best to address their concerns and provide solutions to any issues that arise.
The best opportunity for those looking to initiate franchise programs for growth is to work with a proven expert to lead the way and provide advice.
Here are some must-have tips from industry friend and colleague Mark Siebert:
Developing your franchise: it’s a process
By Mark Siebert
If you don’t know where you’re going, any road will get you there .– Lewis Carroll
You are a franchisor who has had a growth objective in mind for some time. But what happens when you can’t realistically support your growth plans, don’t have the capital to fund the advertising efforts, or you don’t have the support team in place to develop a dozen new franchises in the coming year?
It is imperative to have goals in mind when franchising your business. Perhaps even more important, however, is to be flexible with your franchise goals and how you realistically achieve them.
Set a specific long-term goal
One of the reasons that emerging franchise brands often have to change their original franchise strategy is that they never really put a solid plan in place to begin with. Often times when I speak with novice franchisors, they offer me vague goals like wanting to “grow aggressively while maintaining standards” or share an arbitrary number of units that they would like to achieve in a given period of time. It’s not that these aren’t good goals to achieve; they are simply not specific enough to provide a good roadmap for the future.
Consider deepening the definition of your long-term goals. For example, consider your exit strategy. Do you want to sell your business? For how much? And provide a specific time frame to achieve those business goals. Do you want to sell in five years? In 10? Try to be realistic in your goals. Instead of estimating the value of the business in the future, ask yourself “What is the next five or 10 years of my life worth, if I’m going to spend it on this business?” And respond with your minimum acceptable response.
Only then should you translate your goals into a hypothetical business model that can achieve them (i.e. 50 franchises paying $ 35,000 per year in royalties for a valuation of 10 times the profits) and work back to get the desired result. This will tell you how many franchises you need to sell each year to get to where you want to be in 2022 or 2027.
Don’t make your first strategic growth plan a gospel
One thing to remember when working on your franchise growth plans: A good plan is usually an iterative process. You may need to review your numbers a few times to make them work, depending on your current resources.
It will take a lot of advertising money to sell a franchise, as franchisors who have been successful in this process are well aware. According to Franchise Update Media’s annual franchise development report, the average cost per franchise sale in 2015 was over $ 6,000 for fast-growing franchisors. These costs are typically even higher, closer to $ 10,000, for start-up franchisors and new franchisors. So, if you want to sell a dozen franchises in the coming year, be aware that that will require almost six-figure ad spend.
Then, once you sell the franchises in your plan, your journey as a franchisor is just beginning. It is important to have the right people in your operations to support the new business owners in your system. If you don’t have the right support staff or are understaffed on your growth plan, adjust your growth numbers based on your current ability to support franchisees.
Remember, if your franchisees fail you will fail as a franchisor, so make franchisee success a priority.
Your initial plan doesn’t work: what now?
The good news is that franchisors have a number of alternatives if the first franchise plan fails to provide a productive path forward. It might make sense to move to a more aggressive structure, for example, and change the target franchise candidate to an area developer or even a representative area model. This can enable faster growth and, with the right people in place, potentially enable better regional support.
Another option is to change elements of your franchise structure to make growth goals more achievable. For example, adjust your fees, product sales, and other items to help you achieve your goals, but again, do so with ultimate franchisee success in mind. A franchise program that meets your goals but not those of the franchise will be doomed to failure.
One of the most practical ways to make things work is to consider extending your schedule to achieve your goals. While you might need to sell 50 franchises in your first five years to achieve your desired goal, it may be more realistic to sell 20 or 30 within that time frame. If you extend the desired release date by two years, you may be able to reach your goal in seven years without sacrificing quality.
On the flip side, to accelerate overall growth, some franchise companies will include a mix of franchise and business growth strategies to create assets and cash flow. This multi-pronged approach to development often creates business value the fastest. And it can also help an emerging franchise fine-tune its operations and develop the team it needs to support more franchisees.
If there’s one key to growing a charting franchise, it’s this: Start with the end in mind. Determine a specific path to take to get there, then implement and refine the plan as you move towards that goal.
Mark Siebert is CEO of the consulting firm iFranchise Group. Contact him at 708.957.2300 or firstname.lastname@example.org. His new book is “Franchising Your Business: The Guide to Using the Greatest Growth Strategy of All Time.”