Franchisors Need Balance Between Adding New Franchises and Building Franchise Sales

When developing a franchise system, franchisors typically focus a good deal of attention on adding new franchise locations. New franchisors usually consider the sale of new franchises an important prerequisite for future success. However, In addition to the on-going need to add new franchise locations, franchisors should focus attention on growing individual franchise sales. The best time to introduce this strategy can vary depending upon the complexity of the franchise program. For some franchisors it could be at 25 units for others, 50 units. Hopefully, mature franchisors (those with 100+ locations) already utilize this strategy.

It’s important that franchisors sell new franchises since the franchise fees provides initial revenues and new franchise locations can increase market share and promote the franchise brand. However, franchisors must be careful to direct attention to existing franchises so they have the opportunity to grow their business and be successful. There can be a tendency on the part of some franchisors to sell the franchise, train the franchisee and then let them go so to speak. The danger with this practice is that new franchisees need to get a good start during the first ninety days. Not having an aggressive ramp-up program for new franchisees can lead to financial and operational problems six to nine months later.

Increasing unit franchise sales provides a number of benefits:

  1. Enhanced franchisee profitability.
  2. Having a positive sales strategy will enhance franchise relations
  3. Add more financial balance to the franchise system by relying upon initial franchise fees.
  4. Attention on increasing franchisee sales can assist in the sale of new franchises by improved franchisee validation.
  5. Both the franchisor and franchisee will benefit.

Suggestions for increasing unit franchise revenues:

  1. Establish a marketing committee or task force to include successful and representative franchisees.
  2. Utilize the group to conduct in-depth selected competitive analysis
  3. Evaluate the effectiveness of the existing website with the objective of gaining more customer traffic
  4. Solicit suggestions for new products and/or services from franchisees
  5. Identify pilot locations for new products/services to measure results and establish credibility
  6. Utilize sales contests and other incentives to generate system wide interest
  7. Have a theme, slogan or other vehicle to create awareness and enthusiasm for new products/services
  8. Develop a three month marketing plan for new franchisee sales growth.

The sale of new franchises is a necessary objective for franchisors. However, just as important is the need to grow new franchise sales especially during the important start-up phase.