If you are looking for sound advice on planning your extension program, then take on board this from Alex Wilkes…
While there are several ways to spark successful expansion, a well-planned area development program is often a winning strategy for growth. Recognizing the benefits of reserving large geographic territories, ambitious entrepreneurs in franchise systems can build out significant-sized enterprises comprised of a collection of their own units or sub-franchised locations. Typically, the development structure becomes a “win-win” for area developers and brands – local representation and market knowledge facilitates growth regionally for brands looking to enter new regions.
As you consider growth through area development, conduct an analysis of these two types of area development programs, and select the one that befits your organization best.
In more detail, the two types of area development agreements to examine closely as viable options are:
1) Awarding large territories for individual franchisees to open multiple locations within the regions they purchase, which is a more traditional area development program.
2) Awarding a large territory for an individual or team allowing them to either franchise locations themselves or find other qualified candidates to franchise locations in their territory, which is often classified as an area representative format.
When deciding which route to take, you must consider the benefits each option provides and how it relates to your specific franchise. A couple of guiding thoughts to take into consideration: 1) what knowledge do you have of the local markets where you seek to grow? and 2) what type of field support do you have in place for your franchisees?
The assessment of these types of considerations ultimately will guide you in the type of area development you select. In more detail, here are the benefits of each of the options shared.
There are three advantages of awarding large territories for individual franchisees to open multiple locations within the regions they purchase:
1) Super-narrow targeting of your franchisees: If you are looking to grow with individuals and teams that have specific skills and industry certifications, or if you have very limited geographies, you would benefit from finding one team that fits your profile and granting that team a large territory to develop. If your pool of qualified franchisee prospects that fit your mold is small relative to other franchises, thus a more effective way to build out the territory would be to pinpoint one area developer with the attributes needed to own and operate the business model throughout the region.
2) Reaching growth projections: Eliminating the search for additional franchisees to expand your footprint ideally decreases the amount of time between openings. This is a result of being able to work closely with one franchisee and the same set of vendors on a development schedule that is easier to maintain when dealing with just one franchisee party. With the right area developer in place to reach growth projections, additional benefits such as a simplified funding process and real estate selection can be established. Instead of having to go through the finance and real estate processes with multiple franchisees and multiple third parties, which slows down the opening process, you have one franchisee working with the same partners and learning together as they go. As the franchisee opens the third, fourth and fifth location, the whole process becomes easier for everyone involved.
3) Operational Consistency: It’s no secret that the more franchisees you have in the system, the greater the challenge becomes to maintain operational consistency and a high-quality customer experience across your company. The advantage of having one franchisee own multiple locations is clear: it can help streamline the customer experience and ease of operations across multiple locations. This is beneficial to a franchisor because it cuts down the number of variables in the franchise system.
Awarding a large territory for an individual or team to sub-franchise to others qualified for the franchise opportunity
1) Local knowledge: Signing an area development agreement with an individual or team that has strong local market knowledge and the sales and marketing experience to sub-franchise has several advantages. For one, the area representative often has local connections to network with, which helps find prospects that fit the franchisee mold. The area developer also has a better understanding of the area when it comes to ideal neighborhoods to develop and will have a good sense of the community’s culture and values. All of these elements will help the franchisee find the right leads to nurture.
2) Shared responsibility: Growing a franchise requires consistent work with the right team members. Instead of all development tasks falling on corporate team members or outside sales teams, franchisors can rely on area developers within their franchise system to help grow the brand. Your team would train the area developers with your best practices for marketing and selling the franchise efficiently, but area developers can come to the table with a strong set of capabilities and tapping into their experience can provide benefits to the sales process for the entire development team. Plus, with talented area developers, franchisor teams can focus on developing new territories, and can dedicate resources to other needs within the company – most importantly support systems.
3) Faster growth: The purpose of having an area developer is to grow at a faster rate than signing one unit or two unit deals. Area developer sub-franchise models inherently incentive growth because area developers are motivated to foster growth. Awarding an area developer the opportunity to sub-franchise has the potential to propel explosive growth over a sustained period of time.
At Pearle Vision, we chose to implement the more traditional option – awarding large development territories to skilled franchisees. This option provided steady predictable growth allowing our team to focus on establishing Pearle Vision locations in communities throughout our key growth markets. In just over a year, our area developers are already benefiting from the support structures, decreased royalties, and growth schedule as they open subsequent locations.
As you contemplate starting an area development program, I encourage you to take a deeper dive into your objectives and goals to better determine which type of program would best serve your franchise.
Are You Ready?
As a franchisor, are we ready for an area development program? Three questions to ask yourself:
1) What are my near-term and long-term growth goals?
2) Do we have the internal team to support our growth goals?
3) Do we have the branding and control mechanisms in place to maintain our identity and core company values?
ABOUT THE AUTHOR
Alex Wilkes has been General Manager for Pearle Vision since March 2016, and recently guided the company through the launch of the brand’s area development program, which has already produced growth results in the Tampa and Phoenix markets. Established as one of Pearle Vision’s key pillars for growth, the benefits to entrepreneurs of the area development program include limited exclusive rights to their territory and a reduced royalty fee. To learn more about Pearle Vision’s area development franchise opportunities, visit www.ownapearlevision.com.
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