(FS11) Researching Different Options for Multi-Franchise Ownership

So you’ve been through this before when you purchased your first location. You know what you should look for in the neighborhood, traffic patterns, and surroundings stores. You know the many different forms a storefront can come in and what their pros/cons are. If you were keeping a journal back then of the places you surveyed, right now would be a great time to recover that journal. If you’re not keeping a journal yet, you should start because purchasing franchises can become addicting once you figure out the formula of success. If you need a refresher on tips and info for finding the right location, refer back to Getting Your Franchise Started.

Considering an Existing Franchise Location

If you’re thinking you might want to purchase a pre-existing franchise, you’ll want to talk to franchisees personally. Ask around the franchisee network to see if anyone is putting their franchise up for sale. If they don’t know anyone in the vicinity, you can contact your franchisor and ask them if they have any franchisees that are looking to sell their locations. Remember, if you’re purchasing a pre-existing franchise, you will have to pay a transfer fee, but there are a lot of things you’ll save time and money on as your store will already be stocked with equipment and product. Your biggest worry will be to organize the store how you like it if it’s out of order.

Expanding in Your City

If you’re planning to expand in your neighborhood or city, there will be a little extra analysis in order. You’ll have to examine the terms of territory in your FDD and franchise agreement and work on measuring how far is far enough from your current franchise to place your next franchise. You’ll need to make sure that your community is big enough to support your new location with enough business without detracting from your other location. While you’re more than free to place stores in different states or even different countries if that’s available, it can be costly and harder to maintain, especially in different time zones.  Placing stores nearby makes them easier for you to access as hands-on manager, but if you know what you’re doing, that might not be necessary. If you’re thinking of purchasing a nearby location because it’s already affecting yours, think again as it won’t matter who is in control of the location, if it’s affecting your business, it will continue to affect your business regardless of who owns it. Remember that you also have the option to purchase franchises straight from the franchisor. Most franchises have many company-owned locations, but there are two very different ways they can come about:

• Retro Franchising is when you purchase a store that is owned by a franchisor and/or company and has always been owned by the franchisor and/or company.
• Churning is when a franchise is owned by the franchisor and/or company because it was repossessed from a franchisee who was unable to fulfill their financial or legal promises to the franchisor.

If you have a location in a mall and you’re thinking of placing on one of the islands outside in the parking lot, don’t’ think you can’t and that it will detract for the business your store in the mall gets. You will attract two very different customer pools do to the different levels of accessibility in both places.

Looking for Competition Nearby

Also if you see a competing company in an area that you want to populate, don’t feel like you have to stray away. In fact, with a big enough franchise name, the competitor’s location might ask you to buy them out due to an overwhelming feeling of defeat set in by your big name. If you are purchasing a competitor’s store, you get the good with the bad. The good is you’ve knocked out competition and the bad is you’ll probably spend just as much redesigning the place as you would purchasing an empty place because it’s unlikely that your competition dresses their stores in the same way you dress yours so don’t do it with the thought that you’ll be saving money in the long run.

Continue Reading the Franchise Series

• Being the Owner of Multiple Successful Franchises
• The Good Versus the Bad in Owning Franchises
• Where Does the Franchise Agreement Fit into Everything?
• Crunching the Numbers for Your Many Franchises
• Securing Your New Franchise Location in a Brand New Area