Maximizing Franchise Growth Through Conversions: A Strategic Approach for Service and Retail Brands
Franchise conversions are increasingly popular for service and retail brands to expand their footprint. Instead of constructing new locations, franchisors can convert independent or other franchise businesses into newly branded franchises. This strategy offers several advantages, such as faster market penetration, lower capital investment, experienced existing operators, and additional skilled employees.
At Hand & Stone, we’ve demonstrated how conversions create mutual success, allowing experienced franchise operators to join a recognized brand. We have been able to expand our system strategically and sustainably and believe this strategy will also benefit others in the service and retail sectors.
Why conversion works for service and retail brands
The appeal of franchise conversions is rooted in operational and financial efficiencies. One of the key drivers is the ability to repurpose existing real estate and minimize the costs typically associated with new construction. Real estate expenses, including rent and renovation costs, are often the largest overheads for any business. New rents are often 10-20 percent higher than rates for existing spaces. Conversion also allows brands to bypass challenges associated with new development, such as securing land, construction costs, and lengthy permit and zoning processes.
Franchise conversions are especially beneficial for brands with a proven business model looking to scale quickly. For both franchisors and franchisees, conversions can provide a faster return on investment, since a franchisee is able to take over a business with experienced staff, customer loyalty, and operational infrastructure. For some industries, a competitive labor market can limit growth. A conversion of an existing business unlocks an employed workforce.
The conversion process: Steps to success
The process of converting an existing business into a franchise requires careful planning, commitment, and coordination. To ensure a successful conversion, both franchisors and franchisees need to be aligned on expectations and the steps necessary to integrate into the new brand.
1. Conduct a thorough evaluation
The first step is a detailed evaluation of the existing business. This includes assessing each location, customers, service and product offerings, and current financial performance. Identifying whether the site is in a high-traffic area, assessing future potential to thrive, and including impact of the converted location to existing locations in the market are key. Equally important is the quality of the building’s infrastructure and overall condition. If the cost of necessary renovations to meet the brand’s standards outweighs the benefit, it may be better to consider a different location.
2. Align the brand’s identity with the existing space
Conversion requires a strong emphasis on visual identity. Can the space be easily adapted to reflect the franchise's aesthetic and operational needs? The goal is to create an environment that is instantly recognizable to customers and fits the brand’s identity. Adjusting layout, signage, decor, furniture, and any customer touchpoints must be consistent with the brand’s existing locations.
3. Support for franchisees during the transition
One of the biggest advantages of franchise conversions is the support franchisors can provide during the transition. Brands should offer customized training programs that help franchisees and their staff seamlessly integrate into their new system. This includes training on brand standards and systems, operational procedures, customer service practices, and product offerings.
When Hand & Stone converted 30 LaVida Massage and 23 Massage Green locations into Hand & Stone spas, incoming franchisees benefited from a week of new owner training. This included on-site assistance for their staff and pre- and post-conversion and guidance on integrating our signature services and membership programs. This helped the new franchisees provide customers with the brand experience from day one.
4. Provide ongoing support and resources
After the conversion is complete, ongoing support and guidance is essential. Conversion franchisees have unique challenges and need tailored support but also need to be integrated into the network with the tools and resources necessary for improved performance.
Win-Win-Win
Conversion is a win-win-win for franchisors, franchisees, and employees. For franchisees, converting an existing business offers a pathway to success with an established brand with a proven track record and support system. They can leverage the brand’s established customer base and benefit from brand recognition, which can result in faster customer acquisition and increased market share. The ability to offer additional products or services that may not have been available under the previous brand, such as unique services or specialized products, can also significantly enhance revenue growth. For employees, converting provides an opportunity to advance their careers in a new system and further develop their skills.
For service and retail brands, franchise conversions present an incredible opportunity to grow quickly, efficiently, and sustainably. With careful planning, strong support systems, and a commitment to maintaining brand integrity, conversions allow brands to expand their reach and benefit from a more streamlined, cost-effective approach to growth.
Jennifer Durham is the chief development officer for Hand & Stone Massage and Facial Spa.
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