The role of the franchisor is to recruit, train and guide franchisees to become successful operators. Franchisors need to have the drive to make this happen and the management ability to control the system. They need to be innovative and develop a strong team to service the franchisees. They will no longer be “on the tools” or serving customers themselves. Their new customers are their franchisees.

How many outlets should you have before you franchise?

There are no hard and fast rules, as each business is different. On the Franchise Council of Australia website there is advice that a business should be operating successfully for five years before embarking on franchising.

Retail franchisors should have established several outlets in different locations, to fine tune the operations and ensure that they are viable businesses. One location could be very successful, but the demographics of that area may contribute to that success. If similar demographics do not exist in the next location, it could very well fail. The importance of developing pilot operations cannot be over-emphasised.

For non-retail franchises, it is important to establish pilot territories and operate them as if it was a franchise, using employees. This will assist in making sure that the prospective franchisees have a tried and tested system of operation and a marketing program that works in delivering sufficient customers to make a reasonable return on a franchisee’s investment.

How many outlets before you employ a marketing specialist?

Franchisees frequently invest in a particular franchise, due to the fact that the franchisor has developed an effective marketing program. Marketing programs to drive customers to the franchisees is essential and should be available from the very outset. Outsourcing is generally more cost effective in the early days. The focus should be threefold:

1. Develop an effective programme to attract applications from prospective franchisees
2. Establish a launch programme to establish the franchisees into their new location/territory
3. Develop an ongoing Local Area Marketing (LAM) programme for franchisees to use

In retail franchise systems, the location of the outlet is often the best marketing tool. Rents are higher in regional shopping centres because they attract a ready supply of customer traffic.

For non-retail franchise systems, especially where the franchisor develops leads for their franchisees, the need for a strong marketing program is much greater. For example, a man in a van franchisee is much more likely to have skills in the delivery of services to customers and does not have the skills or the time to source new customers.

How fast should you grow?

The pace of growth will be determined to a great extent by the number of franchisees that are recruited into the system.

There is a strong desire among emerging franchisors to grow as quickly as possible across all capital cities in Australia and even overseas. Growth should be a planned pro-active exercise, rather than a reactive process.

In the early stages, it is simpler to grow new locations or territories within the state where the business started. This will enable the franchisor to keep a close eye on the new franchisees and ensure that those businesses become profitable quickly. Interstate expansion should only be envisaged when the home state is running smoothly.

It is imperative to grow the support team in line with the growth of franchisee numbers. Successful franchisees are the best selling tool for franchisors, especially as prospective franchisees are encouraged to contact existing franchisees as part of the recruitment process.

Growth should only take place after it has been determined that future locations or territories are financially viable.  Growth should be a planned process with targeted locations or territories as part of an overall roll-out plan.

By all means, be flexible in this approach, but do not extend the geographical expansion to areas where the franchisees cannot be easily supported.