In a recent study by the research team at Franchise Grade has indicated that 71% of franchise systems have 100 or fewer franchise units and 58% have 50 or less. We consider this segment to be “emerging” franchises. They represent a diverse group ranging from startups to small franchise systems, with a few exceptions, they have limited market penetration and lack brand recognition.
The emerging franchise systems need to build brand recognition which will aid their existing franchisees and help to sell new franchises. For startup and smaller systems, the franchise development process should utilize cluster marketing which offers franchisors and its franchisees distinct advantages. Cluster marketing in franchising means, the more locations in a certain market of region give you the opportunity to utilize your franchise resources more efficiently. These include faster brand recognition, maximizing franchisor support services and gaining competitive vendor pricing for franchisees. Cluster marketing also allows marketing and advertising monies to be spent more productively.
To complement cluster marketing, the startup or small franchisor should grow outward from its base of operations and corporate locations. This provides new franchisees the branding and support that new franchisees require.
Despite the benefits from cluster marketing and similar development strategies, ultimate success of brand building depends upon being in the right markets. This means applying as much attention to the quality of the market as a new site. It includes using Franchise Intelligence and our Maps product to identify the best markets for the franchise. Being in a new market combating a highly-recognized franchise brand can lead to failure despite how good an individual franchisee location is.
If a franchisor wants to build brand recognition it’s critical too; find the best markets, know the strength of franchise competitors and avoid locating franchisees in widespread and diverse markets. Above all avoid placing new franchisees in isolated markets where building brand identity will be difficult if not impossible.
When it comes to franchising, Murphy’s Law comes into play more often than desired. In many cases, a new franchise takes off slower than anticipated.
Before a prospective franchisee invests they must review the information disclosed in the Franchise Disclosure Documents.
The most immediate consideration is usually how much is the franchise fee and other ongoing payments like royalty and advertising fees.
In the franchise industry, franchisors can view comparisons and relationships between consumer satisfaction for the products or services a franchise offers.
A good consumer experience is not a reason to invest in a franchise. It skews the decision-making process of a prospective franchisee from start to finish.