Your business is running smoothly and you have a strong desire
to grow. Your clients and/or customers ask you all the time if you
have other locations. It's time for you to expand
(congratulations!) but you're not quite sure how to do it. So what
is the best growth strategy for your business?
Should you open more company-owned locations or franchise your
business? As a Franchise Developer who has franchised all types of
business all over the United States, here's how I sum up the
benefits and risks of each option.
Company-owned expansion may be the best option
if you are well-funded to open multiple locations quickly.
If you open more locations yourself, you will:
- Make more money as you retain all profits from the
- Maintain control of all aspects of business operations and keep
trade secrets in "the family".
- Have the option to share resources and employees between your
- Research the demographics for each location, so you can
properly market and advertise your business.
- Need to fund each location and be responsible for all costs.
Basically you will have 100% liability for each location.
- Be responsible for the management and operation of each
location, including hiring & training of managers and
- Experience slower growth and branding as this is contingent
upon how much money you have to continue opening locations. In
other words, if you want your business to become a well-known brand
you need to open more locations in a short amount of time.
- Be challenged with finding solid, key employees in order to
minimize employee turnover. Constantly training new employees
can erode your profits and create burnout.
Franchising your business may be the best
option if you do not have or cannot obtain the funding necessary to
open multiple locations quickly. If you franchise your business,
- Not have any fiduciary responsibility for each location nor be
responsible for hiring employees or daily operations for each
- Receive an ongoing fee (royalty that can be structured a number
of different ways) for each franchise rather than share in the
- Experience rapid expansion into markets you could not otherwise
reach, which will support becoming a well-known brand.
- Be expected to continue to grow your brand in the interests of
the entire system (for example: continue to create new programs and
services or introduce new products and marketing pieces for
everyone to use).
- Need to "let go" and allow others to operate your business (as
long as they follow your standards).
- Experience royalty revenues that may be less than profits from
company-owned locations in the beginning.
- Have to spend resources and time to recruit franchisees.
- Become less involved in the day-to-day operations of your
business and more of a mentor, which means you will need to make
yourself (or key personnel) available to counsel franchisees when
they seek assistance.
Of course, everything is not always black and white. Some things
just "feel" right. It is the "fire in your belly" attitude that
drives you and many other successful entrepreneurs! Passion,
motivation, initiative and attitude are what got you this far. Now
may be the time to either invest in opening other company-owned
locations or harness what has made you successful so you can teach
others (franchisees) how to be successful at operating your
business in their market. Here are a few questions to ask yourself
to validate your gut feeling that expansion makes sense for
- Are your services and/or products unique and different?
- Is there a demand for your services and/or products?
- Are you profitable?
- Have you created a unique way of doing things?
- Does what makes you different from your competitors directly
contribute to your success?
- Do you have "copycat" competitors popping up?
If you answered YES to any of these questions then you obviously
are doing something right. Take a look at your business to
determine which expansion solution makes sense for you based on the
comparisons above. If franchising is the direction you choose, then
know that you will be bringing into your system enthusiastic
entrepreneurs who will invest their time, energy and resources into
opening your business in other markets.
David R. Waldman is the founder of The Franchise Maker®
providing complete franchise development services to business
owners who wish to franchise their business nationwide. The
franchise Maker® is recognized in the industry for making the
process to franchise Easy, Fun and Affordable.
For more information about Franchising your business, please
contact The Franchise Maker