For franchisors, one of the inherent conflicts in expanding your brand is the tension between optimizing your market penetration and maintaining strong relationships with your franchisees. Most franchisees want you to build brand awareness by opening new units in their market—until you open one in their “back yard.” Then your legal right to do so and your theoretical justifications for doing so go out the window, and all hell breaks loose. So how do you handle the conflicts in this situation?
March 18, 2016
Developing Your Expansion Plan, Addressing Encroachment
Joe Lewis, Smoothie King Franchises, Inc.
Franchisors use many different approaches. But whatever approach you choose, you should start by making the commitment to develop a strategic plan and provide the time and resources to work through all of the variables affecting your particular expansion model. Executive leadership should make the project a priority and consider including a cross-functional department team, such as franchise development, legal, operations, and marketing, along with the Franchise Advisory Council (FAC) or a task force team of franchisees (within appropriate limits) so that each area can bring its perspective and expertise to the table.
One of the first considerations in developing your strategic plan is to examine the underlying assumptions of how you will develop your markets. Will you use single-franchise agreements only, area development agreements, or some other structure? What measurements will you use to determine the optimum number of units that can be established in each market? These usually include key demographics, such as population density, traffic patterns, geographic features, and other factors relevant to your concept. Strong analytical tools have been developed to help you understand your brand’s customer profile and provide this data. Many of these tools will also use this data to give you probabilities of impacts from the location of new stores.