What’s more important for franchise growth: the market or the location?

When developing a strategy for developing a franchise system, franchisors often follow different paths. In some case’s the path a franchisor selects will depend upon a number of factors, the type of franchise, its size, required investment and system maturity. Based upon these attributes franchisors will usually migrate to one of the following approaches:

  1. Franchisors that begin their growth by being in proximity to their company headquarters and company locations. This approach enables a franchisor to be supportive while franchisees grow brand awareness.
  2. Franchisors that will grant a franchise anywhere providing the franchisee is qualified. This approach can result in strong growth but in many cases at the expense of a fragmented network. A franchisee here and there won’t enable strong branding.
  3. Finally, there are the franchisors that establish a sound development strategy based upon market demand, ability to provide support and competitive factors.

Although there are some successful franchisors that follow numbers 1 and 2, I would submit that the most effective way to develop a successful franchise system is number 3. Recognizing how difficult it is to turn down a qualified candidate, the fact remains, that without a clear understanding of how viable a market is can lead to isolated franchisee locations, low brand recognition and a miss-allocation of franchisor and franchisee resources. In terms of site location; the best site in the wrong market will accomplish little in terms of overall system development and brand recognition.

Although a strong viable market and good site locations are both important, the fact remains that focusing on the right market is the critical step in the process.

Evaluating a market for a franchise requires answering the following questions:

  1. What franchise systems are already in the market?
  2. Are there dominating franchise systems with strong branding?
  3. How many franchise locations do they have?
  4. What challenges do independent businesses similar to the franchise present?
  5. What type and frequency of advertising are existing franchisees in the market utilizing?

These are the types of questions that should be answered before committing to a franchise development plan in a particular market. Although proper site location is a key part of the franchise development process, being in the right market is paramount.

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