When we launched our franchise consulting company, we knew that emerging franchise brands struggle with growth. The statistics don’t lie. As we dug into a number of emerging brands, it became apparent to us why many brands fail to grow: they don’t know, and therefore don’t have, the proper systems required to scale their business.
Think about it. Franchise brands should spend a lot of time building their systems so that their franchisees succeed. Their initial focus goes to creating systems to build the core, operating business. If I am launching an education franchise, then I better make sure I have the systems necessary for building, and operating an education business perfected. But what about the franchise side? What about the systems to scale the actual franchise business? What about the operations manuals for the systems to run the franchise? These are so often an afterthought. It makes sense: emerging franchisors only have so many resources and can only focus on so many things at a time. So, 95% of their focus goes to building a successful business for their franchisees. The result? Most franchise brands get stuck at 10 units or less because they haven’t implemented the systems required to grow past this point. At Hartify Franchise Consulting, we refer to this as the 10/25/50 Trap.
At this emerging stage, to me there is one key system that is the essential, yet very, very few franchise brands have it in place: a franchise development system.
No entrepreneur launches a franchise system with the goal of having only 10 units. Yet most brands never surpass 10 locations.
When I look back to analyze why my company was so successful in its early days of franchising? We were strong at franchise sales. First we blew through 10, we blew through 25, and then we blew through 50 franchise units in a fairly short period of time. And we did this in Canada, where the franchise sales market is only fraction of that in the U.S.
So, what does it take to master the craft of franchise development? At a high level, here is the first advice I always give brands:
You need to spend money to make money.
It’s amazing to me how many franchise systems say to me “we want to add 20 new units this year.” And I say, “Great. How much $$ are you going to spend?” And they look at me, bewildered, and reply, ” Oh. I never even thought about that.”
(My answer, by the way, is “Okay, awesome. It’s so great that you have a budget of $100,000 to do that”).
Some brands simply don’t have any money to do this. If this is the case, you have a serious issue with your model. It means something is wrong – your corporate franchise doesn’t make enough cashflow to fund the franchise business; your franchisees don’t provide enough royalties to cover some of your costs; or your overhead is just simply too high for the size of where you are at. If you don’t fix these things, you will never grow.
For many brands however, the question becomes “How much do I spend and where do I spend it?” When we consult with brands, this is one of the first places we spend a lot of time on in the “Find a Friend in Every City” discipline of our Hartify Method for Franchise Sales.
My simple answer? We have a package we call the “Get in the Game” lead generation package, which is the starting point for lead generation for any brand that needs to grow its franchise count. The spend? $1,500 per month. Brands that can commit to this monthly spend for a year are going to grow their franchise system, (almost) guaranteed (whether it is with us, or not). How did we come up with this number? Thousands of leads, hundreds of thousands of dollars spent, countless metrics being analyzed, hours and hours of copywriting and studying, and time. We know with pretty decent accuracy how many leads you will get, and if the right conversion systems are in place, how many franchises you will sell. It’s a science, really.
Obviously there is a lot more to it than just spending money, but that is the starting point of franchise development. Spending $1,500 is truly a “Get in the Game” strategy. If you want to grow more than just a few units per year, you need to spend more. It’s as simple as that.
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