Franchise Expansion: Benefits and Expectations

Franchises have yielded success because of their proven business models, brand recognition, and profitability. It’s an attractive option for prospective business owners or entrepreneurs because they don’t need to build the business from the ground up. Plus, since franchising can be a lucrative business for existing franchise owners, they are tempted to buy a new unit or invest in a new brand. That’s why many opt for a franchise expansion, whether they have a business or an existing franchise unit.

If you’re interested in increasing your sources of income via a franchise expansion, here’s your sign why you should do it.

Things to Consider Before Your Franchise Expansion Plans

• Capital – This is the only question you need to ask yourself before expanding your portfolio, “do I have enough capital to invest in a new unit or branch out to another franchise brand?”
• Time and Availability – Most franchises don’t require you to be on-site all the time. However, you might have to dedicate time to visit and oversee your franchise to see how things are running. If expanding your franchise portfolio is your goal, consider starting part-time franchises. You won’t spend as much time compared to your first unit. Plus, you can leave the reigns to an experienced employee.
• Location – Although most franchisors get the final say on where your site should be, it’s best to survey areas to set up potential franchise units.

Now that you know what to assess before expanding your franchise portfolio, here’s why it would benefit you!

1. Increase Profits

One obvious reason to expand your franchise portfolio is to get more profits. Although you might stick to one because it’s less risky, having second or multiple units can double or multiply your return on investment. You can look at a new franchise unit as an extra source of income or cushion if things aren’t working out with the first.

2. Cater to Other Locations or Markets

One advantage of franchising is that it can reach underserved markets. With this in mind, you can align your goals with the franchisor to branch their franchise. This means you can start researching other locations where you can set up new franchise units. What should you consider when choosing a location?

• Demographic/population
• Competing brands/franchises
• Addressing the needs of the community

3. Quick Set-Up

For new franchisees, the process of starting a franchise can be long. After all, once you send your inquiry to the franchisor, you have to attend discovery days and get approval for your application. But the best thing about starting a franchise is setting it up. Since they’re like turnkey businesses, all you need to worry about after approval is launching the franchise and operating it.

Meanwhile, existing franchise owners don’t have to worry about starting from scratch. Although getting a unit is subject to approval, it’s easier for current franchise owners to get a new unit, especially if you’re applying from the same brand.

4. Diversify

Existing franchisees have the opportunity to operate a different franchise brand if it’s part of a franchise group. For example, Neighborly is a franchise consortium of home services. If your first franchise is in maintenance repair, you can choose cleaning or organization as your second franchise unit. With this, you can specialize not only in one niche but in an industry.

How to Start a New Franchise Unit

For First-Time Franchisees

If you’re ready to tackle the responsibility of being a new franchisee, here’s what you can do:

• Do your research – You don’t want to go in blind when thinking about starting a franchise when you have an existing business. Find which franchises are suitable for your current situation. Plus, by researching, you’ll know what to expect when running a franchise.
• Select a franchise – It’s up to you which franchise is the best one for you. Fortunately, you have various options to choose from. Since you have an existing business, it’s best to try another industry. After all, you don’t want your own business competing with your franchise.
• Send an inquiry – You don’t need to finalize a decision on which franchise you’re choosing. It’s best to have various options. Fortunately, you can send inquiries about your preferred franchises.
• Attend discovery days – Discovery days are a great way to know franchisors better. You can ask them questions directly. Plus, you get to see other prospective franchisees too.

For Existing Franchisees

• Review the franchise disclosure document (FDD) and agreement – Before saying yes to a new franchise, you need to go over the FDD and franchise agreement. Your franchisor may have a policy that you need to complete a number of years before you’re eligible to open a new franchise unit or brand.
• Talk to other franchisees with multi-unit or multi-brand franchises – One way to know if a new unit or brand is for you is by asking other franchisees about their experience. You’ll know what goes behind the scenes and what to expect when handling more than one franchise.
• Talk to your franchisor – What if you’re itching to have a new unit before you can renew your contract? Speak to your franchisor immediately and ask if there are options for you.