Creating and executing a rock-solid development plan
For a franchisor, the right to make a mistake does not exist. I have seen the dramatic consequences that a franchisor’s error can have on franchisees during my career. You know as well as I do that there is no such thing as zero risk. However, the franchisor must do everything in their power to mitigate problems for franchisees.
The solution? A development plan.
For many franchisors, a development plan is a fuzzy concept that boils down to a single objective: the number of new franchises to open. This is far from the case because this number only represents the result of the initiatives carried out upstream. It would be interesting, and more representative, to measure success based on the number of open and profitable franchises after 12 months. This way of quantifying success over time (one year) would avoid unfortunate consequences for franchisees and the slowing down of network development.
A rock-solid Development plan – 5 components
A development plan is a strategic tool that takes into account the franchisor’s growth needs, internal and external resources, and the constraints specific to the type of franchise.
1. Optimize franchisee territories through geomarketing
By using the geomarketing science to select markets and sites, the franchisor ensures that the network can be optimally developed—all while reducing errors. In addition, with a well-designed plan, the franchisor can optimize the franchise’s development without cannibalizing other territories and avoid underperforming sites.
2. Create a recruitment campaign for franchisee candidates1
Finding good franchisees is a much more significant challenge than you might think. The only solution is to be constantly active in recruiting even if you don’t have a site to offer at the moment. However, if the territory is open or if you already have a site, it will make things easier. Having a database of qualified franchisees ready to jump into action at any time will facilitate your growth.
3. Actively search for new sites
Quality real estate is a strategic asset that creates value for a franchisor. Staying active in the search for sites, using real estate developers and brokers, will ensure you have a wider variety of choices. Before you offer the first site you find to a potential franchisee because you don’t want to lose them, it is essential to have qualified the site! Sometimes, this step is overlooked by franchisors. You must take the time to assess the site carefully, do market research and make sure the lease is competitive. This approach reduces the risks!
4. Put together an experienced development team
The growth of a franchisor definitely depends on a competent development team. Too many variables can nip a project in the bud! A talented development team will include the person responsible for recruiting and selecting potential franchisees as well as the resources required to negotiate leases and build the franchise network. The investment costs of the franchisor and the new franchisees must be in line with the business model for each location. Unexpected expenses and the profitability of the franchise can be at risk.
5. Create an onboarding program for each new franchise
For many franchisors, the start-up of a franchise is a mundane step—but it’s actually a crucial step! Often, all of the franchisor’s resources are devoted to opening a new franchise. Unfortunately, afterwards, franchisees are left to their own devices; there is no structured or organized follow-up with the franchisees. This is a mistake! Franchisees generate the proper performance levels if 1) they reach the break-even point of their cash flow and 2) generate the profits expected in their business plans to generate the targeted return on investment (ROI).
Conclusion
The right development plan will help you to manage risks better. It becomes the strategic foundation of your long-term growth when your plan is effectively executed. One might prefer the short-term, but as a franchisor, your responsibility is to do everything possible to ensure the sustainability of your franchisees to ensure yours. Isn’t that the best way to create value?
1See Part 2e – The Expensive Business of Franchising