Formulating Your Franchise Expansion Plan

You have assessed the feasibility of your proposed expansion and the numbers are stacking up. Now it is time to start formalizing your expansion plan by delving into the nuts and bolts of your franchise.

By Lindy Barbour

In this segment of our franchise development series we provide a guideline as to the information to be covered in the franchisor’s expansion plan. Albeit the expansion of a proven business format, a franchise expansion is the inception of a new business and the franchise expansion plan can also be regarded as the business plan of the franchisor.
Always remember that there is no easy route to anywhere worth going and starting out with a solid foundation is key. The franchisor must be willing to commit the necessary resources, be it time, money or expertise, to ensure that the business plan is sound before offering it to third parties.

One of the biggest pitfalls in franchising, in South Africa and around the world, is the misalignment of expectations. To avoid this common mistake, start by mapping out the proposed responsibilities of both the franchisor and franchisee. Divide the responsibilities of each into the initial responsibilities to be assumed at the point of recruitment and set-up, and the ongoing responsibilities. Weigh the cost of the responsibilities you assume against the fee income generated and rather err on the side of “under promise and over deliver”. Where the franchisor has close links to the supply chain, such responsibilities must be clearly differentiated from those to be fulfilled in the capacity as franchisor.

Of particular significance in the franchise expansion plan is the franchisor’s country development plan. During the feasibility study the number of probable franchises should have been calculated based on the market potential. Best practice suggests plotting the expansion plan over a three to five year period and clustering development plans in order to reap the rewards of economies of scale in terms of support costs by capitalising on brand recognition. What does this mean in simple terms? Expand per province and start close to home.

When formulating the franchise development plan, plot the franchisor infrastructure in tandem with the country development plan. For a successful rollout the correct infrastructure must be in place. This is true even in the early stages when the franchisor’s infrastructure is lean-and-mean with perhaps only one person to provide support with the help of outsourced and shared services. These support functions include elements such as network development, finance, marketing, training, IT, systems, franchisee recruitment and operational expertise.

One of the key elements to a successful franchise expansion plan is selecting the right franchisees. Take care when plotting your ideal franchisee profile and bear in mind that the answer to what makes an ideal franchisee, may not be as obvious as it first appears. In plotting your ideal franchisee profile, consider the roles and responsibilities the franchisee will be required to fulfil, then list the qualities, attributes, experience and qualifications (if any) required. Also reflect on the factors that have contributed to the success of the business model thus far. A camping accessories shop, for example, is not necessarily best run by an outdoor enthusiast. As a retail business operating seven days a week, the franchisee is not likely to see the natural light of day, especially at the outset, and a better candidate would perhaps be someone with sales and marketing experience rather than a love of the outdoors.

The franchise expansion plan should further detail the marketing strategies that will be employed to reach candidates that match the ideal franchisee profile, as well as the process flow of the franchisee recruitment process. As franchisee selection is one of the most important decisions you will make, it is necessary to not rely on a singular interview alone. Between first application and final interview, include a number of stop checks that will afford you the opportunity to assess the attributes of the franchisee in relation to your ideal franchisee profile.

A new franchisor has to give due thought to the systems and reporting required. This includes not only the IT and point-of-sale systems, but also those necessary for managing back office functions. The systems must be capable of supporting a network of franchisees down the line and, if necessary, the franchisor head office should be able to tap into such systems. The reporting required by franchisees as well as the communication between franchisee and franchisor should also be mapped out.

For franchisees to be successful it is imperative that they receive the necessary training in all operational aspects, but also administrative aspects such as financial management. On average in South Africa, training of newly recruited franchisees is conducted over three weeks and further ongoing training is then provided as required.

There is a misconception amongst aspiring franchisees that the hardest part will come later down the line; this is only true if the proper groundwork and development was not done at the outset. As the old saying goes – if you fail to plan, then plan to fail!

www.franchize.co.za
linday@franchize.co.za
+27 11 803 0665

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