FRANCHISE DEVELOPMENT: Franchise Expansion Plan

Your Franchise Expansion Plan

You have assessed the feasibility and the numbers are stacking up. It is now time to start formalizing your expansion plan by delving into the nuts and bolts of your franchise. The expansion plan really is the business plan of the franchisor. Remember we noted that a franchise expansion is the inception of a new business albeit it is the expansion of your proven business format. This article will provide you with insight as to what this business plan for the franchisor should include. Your business plan in most instances may require further fine-tuning or investigation on your part but there is not an easy route to anywhere worth going and its best to have a solid foundation at the outset before you commence with the implementation of your franchise. It is essential that the Franchisor invests the required resources – be they time, money or expertise – in order to ensure that the business development is sound before offering it to third parties.

Sadly one of the biggest errors in franchising both in South Africa and around the world is the misalignment of expectations. So to start your plan it is essential to begin by mapping out the proposed responsibilities of both franchisor and franchisee. This must be separated into initial responsibilities (at the point of recruitment and set up) and ongoing responsibilities of both parties. Keep within the boundaries of your fee income and err towards the ‘under promise and over deliver’ without losing your unique offer to incoming franchisees. In the instances where a Franchisor is also closely linked to the supply chain these responsibilities must be clearly differentiated from those of the Franchisor.

The country development plan is crucial to include as part of your expansion plan. During your feasibility study you would have calculated the number of franchisees based on the potential market size. The best is to now plot the expansion plan over a three to five year period. A best practice in franchising would be to cluster your development plan in order to enjoy both brand recognition and reap the rewards of economies of scale in terms of support costs. What does that mean in simple terms? The Franchisor should expand per province and ideally the start should be close to home!

It is important to plot the Franchisor infrastructure in tandem with the country development plan. The Franchisor requires the correct infrastructure to support the roll out of the franchises. In the early stages of franchising it is often the case where this infrastructure is lean and mean, and thus it may only be one person fulfilling the different support roles with the required outsourcing or shared services where necessary. These support functions include elements such as: network development, finance, marketing, training, IT, systems, franchisee recruitment and the required operational expertise.

The key to a successful franchise is the selection of the right candidates as franchisees. List the qualities, attributes, experience and qualifications (if required) of your ideal franchisee. Look back at the roles and responsibilities and be honest about what has helped to make your existing business work. It sometimes is not at obvious as it seems. For example a camping accessories shop is not best run by an outdoor enthusiast. It is a retail business which in most cases will operate 7 days a week and is best suited to a candidate with sales and marketing experience, in fact the franchisee is not likely to see the natural light of day especially at the outset. The bottom line is that it is just simply a retail business, not a camping business. Be very careful when plotting the ideal profile of franchisee, as this could be the make or break of your expansion plan. With the ideal profile noted, now include how you market your franchise to reach this pool of potential candidates and the process flow to best identify the attributes you have listed from first application form to the final interview. It is important to note that the recruitment process should include a number of stop checks and not just a short interview as it is one of the most important decisions you will make.

A new franchisor has to give due thought to the systems and reporting that will be required. This includes not only the IT system and point of sale system but also the necessary systems for back office functions. It is import ensure the system will support a network of franchisees down the line and in most cases it is essential that the Franchisor head office can tap into this system. The reporting required by franchisees as well as the communication between franchisee and franchisor should be mapped out.

A franchise system can also not expect franchisees to be successful in their business if they are not trained correctly. This training should not only include operational aspects of the business but also due time and consideration should be given to elements such as financial management. On average the franchise systems in South Africa train their newly recruited franchisees for 3 weeks and the further ongoing training as required.

Many people who are new to franchising think that the hardest part will come later down the line. This is only the case if the proper groundwork and development is not done prior to rolling out the business concept. As the old saying goes – if you fail to plan, then plan to fail!

Lindy Barbour
Franchize Directions
(011) 8030665