What’s More Important for Franchise Growth: The Market or The LocationPublished on May 17, 2017
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When developing a strategy for developing a franchise system, franchisors often follow different paths. In some case’s the path a franchisor selects will depend upon a number of factors, the type of franchise, its size, required investment and system maturity. Based upon these attributes franchisors will usually migrate to one of the following approaches:
- Franchisors that begin their growth by being in proximity to their company headquarters and company locations. This approach enables a franchisor to be supportive while franchisees grow brand awareness.
- Franchisors that will grant a franchise anywhere providing the franchisee is qualified. This approach can result in strong growth but in many cases at the expense of a fragmented network. A franchisee here and there won’t enable strong branding.
- Finally, there are the franchisors that establish a sound development strategy based upon market demand, ability to provide support and competitive factors.
Although there are some successful franchisors that follow numbers 1 and 2, I would submit that the most effective way to develop a successful franchise system is number 3. Recognizing how difficult it is to turn down a qualified candidate, the fact remains, that without a clear understanding of how viable a market is can lead to isolated franchisee locations, low brand recognition and a miss-allocation of franchisor and franchisee resources. In terms of site location; the best site in the wrong market will accomplish little in terms of overall system development and brand recognition.
Although a strong viable market and good site locations are both important, the fact remains that focusing on the right market is the critical step in the process.
Evaluating a market for a franchise requires answering the following questions:
- What franchise systems are already in the market?
- Are there dominating franchise systems with strong branding?
- How many franchise locations do they have?
- What challenges do independent businesses similar to the franchise present?
- What type and frequency of advertising are existing franchisees in the market utilizing?
These are the types of questions that should be answered before committing to a franchise development plan in a particular market. Although proper site location is a key part of the franchise development process, being in the right market is paramount.
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