What does it take to operate a franchise network of more than 900 outlets without closing the doors on a single business?
Daniel Adelstein, vice president of international development, has been with Orangetheory Fitness Global since the early days of the business in 2010. Last year the business opened 294 studios worldwide and reported more than $738m in system-wide revenue.The brand will unveil its 1000th location this northern hemisphere summer.
“There’s never been a closure,” points out Adelstein, with all franchisees departing the network resellling their studios.
Adelstein is in Australia visiting the master franchise Collective Wellness Group. Here he shares his tips for expansion with Inside Franchise Business.
5 ways to fix your franchise growth
1. Find the right franchisee
“We have made mistakes and we took some chances,” he admits. “These days we’re very stringent. We look for people who will devote time to the business, spend on marketing, follow the rules and not paint the orange walls green.
“For our area developers we look for a good business plan, we put them through their paces in the presentation process. We want to know who will be involved in running the studio, who is doing the accounting…we set them up for success on a regional level.”
And if there are some holes in their plans, don’t sign them up.
“It’s not all about the sale these days. We’ll hold the territory and wait for the right franchisee.”
2. Set up your franchisees for success
“Make sure franchisees get what they need to be successful,” says Adelstein. “We know they need support, we stumbled a bit with that. Now we know we need to understand the first location so we’re more involved in real estate. We ensure franchisees are bringing in the right trainers, doing pre sales marketing, and we’re in the market when they get going.”
Franchisees have to know how to sell the brand offer, he says, and that means educating people on the value of what they will get out of it..
It takes more than the knowledge the model works to set up a business for success, he says, with the initial days of trading crucial.
Orangetheory franchisees build interest in a new studio through pre sales, a teaser campaign, activity on social media. They are encouraged to attend events, perhaps open a pre sale centre, do some guerilla marketing during a typical six to eight week site build.
“It’s about getting things, creating a buzz.”
It’s also important to keep people engaged when they have signed up before an outlet opens, he points out.
And for franchisees who are not going to be hands-on in the business, ensure the right people will be running it; charismatic trainers for instance who will make sure clients are referring their friends.
3. Excel or sell
In a service environment not reliant on the purchase and sale of perishable goods a franchisee’s focus should be on bringing in business. For Orangtheory it’s about filling classes, says Adelstein.
Franchises need a great product that is scaleable in terms of profitability, they need the experience to be the same globally.
“We just need to execute in following the system, look, feel and experience,” he says.
Failing franchisees have generally fallen down in following the system.
Adelstein has found “honest conversations”, mystery shoppers and 360 degree feedback can help focus franchisees.
His advice for underperforming franchisees is to not be mediocre. “Mediocre kills the brand. Excel or sell,” he cautions.
Franchisors need to get franchisees out or move them forward, he says. “Plenty of owners are very successful and have done well, so if people do move on we’ll find a buyer for the studio. In the US we’ve had some resales, we’ve had to push some people out. But in 29 out of 30 resales, the figures went up with a new owner.”
4. Find the hot spots
Orangetheory Fitness is poised to open in Poland and New Zealand, and has 110 outlets internationally. In the US alone there are 70 regions. In its search for the next potential-filled territory, the business uses data to match the demographics to the US profile and the type of individuals in the region.
5. Consolidate before expansion
In Central and South America the fitness chain has signed up some individual licenses because the proximity to the US makes it easy to provide direct support. In the UK, like Australia, expansion is through a master franchise
A lesson from signing up master franchisees has been to limit the initial franchise growth.
“Over the last year some have taken their eye off the ball, so we’re moving more towards area development.”
It’s incumbent on area developers to prove themselves with a few sites before Orangetheory will commit them to expanding through franchising studios.
“The first pilot studios are critical, theyll help validate the growth of others buying in. It sounds easy, it looks cool but a lot of work goes into what we do. [Australian master franchisee] Collective Wellness Group understands what it takes.