Franchisees Expanding Out of State
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Franchisees Expanding Out of State

From handwritten business logs to detailed software programs, the way in which businesses run has changed significantly over the last fifty years. Perhaps one of the most significant changes in the last 10 years has been the shift to multi-state business ownership.

Technology and the nature of franchising have made it possible for many to run a multi-state business and still remain very hands-on in the day-to-day operations.

Successful franchisees are now opening second, third, or more locations in areas which are one or more states away from their home and original franchise location.

Many franchisees are choosing the multi-state franchising option either because there are no more territories available in their home area, or because they are looking toward the future. Many successful owners are looking to build a business in the area where they wish to "retire" or re-locate at some time down the road.

Although multi-state franchising may be attractive for those looking to grow their business and expand into other markets, something that should be carefully considered not only by the franchisee, but also by the franchisor.

Franchisors must have a clear understanding of what type of business owner will be successful in such a venture and how best to support franchisees choosing to take this step.

First they should examine all possible roadblocks now and be sure the franchisee is giving careful consideration to all of these issues and has a solid plan for dealing with them.

It is easy to underestimate the difficulty of starting a new business from scratch far from one's core business area and service market. One possible solution to this difficulty is for the franchisee to buy an existing franchise location. This eliminates the startup process, giving the franchisee an existing customer base, trained employees and an up and running business. Assuming the multi-state franchisee is purchasing a strong franchise and he or she has the skills to maintain and grow the business, these situations tend to work out best.

The franchisee should have a firm plan in mind with specific tactics mapped out for developing the new area while continuing to grow an existing home-area franchise. Obviously, the franchisee and franchisor both want the new business to flourish and grow, but it's important not to lose sight of continuing growth at one's home-area franchise as well. Without growth of both businesses, the franchisee may be working harder with minimal added results and higher overheads, while the franchisor is faced with stagnant growth in two markets.

Franchisors have the benefit of seeing the big picture. We're involved with all of our franchisees and have seen what has worked for them and what has been detrimental. In my experience with helping Merry Maids franchisees branch out to other states, I have seen that franchisees with capable and available family members have done very well. Putting an on-site manager in place at one's out-of-state franchise location is a key first step. Often franchisees will find their grown children, who have watched their parent's efforts in franchising, have some experience in the business, and are ready to get involved. A qualified family member can be the most trusted manager and can aid a franchisee in building a successful business far from home.

Of course, plans, capable employees and even an existing up and running franchise in and of themselves are not going to guarantee success. Franchisors need to be sure their franchisees have the funding and infrastructure needed to support the new business while maintaining the growth of the existing franchise. The franchisor role here is very important. Challenge your franchisee to take a long hard look at his balance sheet. Does he have the cash reserves necessary to weather the start-up period if he is opening a new franchise from scratch? Or will that money need to be pulled from their existing franchise? Asking your franchisee the tough questions will only benefit him and you in the end.

It's important for franchisees to understand that taking support and marketing funds from an existing franchise in order to support a new one is not a good move. Each business needs its own solid footing and on-going financial support in order to grow into strong franchises yielding high profits.

If your franchise system has company-owned branch offices, insight into branch office operations can prove invaluable to your franchisees. It is vitally important that we as franchisors always keep top of mind the fact that a big reason entrepreneurs choose franchising over opening an independent, single location business, is due to the knowledge and support a home office provides. If you run branch offices, provide your franchisee with as much information on the operations of those branch offices as possible. Learning from your proven model will greatly increase her chance for success.

We all want to protect our brand, do all that we can to recruit successful franchisees and support those franchisees in their growth. However, even when a franchisee is hugely successful in one market, that is no guarantee she will be successful in running a multi-state operation. Thankfully, determining which franchisee will succeed and which franchisee may not is easier than it may seem. A successful multi-state franchisee will have many of the same qualities and abilities as the franchise owner in your system who is currently operating multiple territories all in the same area.

Qualities that give a franchisee a better shot at doing well with multi-state franchising are:
The ability to recognize, grow and develop a good core management group
The ability to delegate key responsibilities
The ability to trust that management group to make decisions in her absence

Giving counsel to franchisees considering the move to multi-state franchising is the most complicated aspect of the franchisor's role. Once an owner is operating multiple franchises in two or more states, she may require little more in terms of support than a single unit or single state owner does. But, in some cases, a multi-state franchisee can benefit from working with two different operations support managers, each focusing on one of the franchisees' markets.

Although venturing into multi-state business ownership is often uncharted territory for franchisees, providing sound advice and strong support is status quo for the successful franchisor. Offering your franchisees the support they are used to while ensuring they have asked themselves all the right questions on the front end is important. Both franchisor and franchisee benefit greatly when successful franchise owners branch out and continue to build strong franchise locations across the country.

Rob Sanders has been assisting entrepreneurs into business for more than 25 years for American Suzuki Motor Corp., Mac Tools, and currently as director of market expansion for Merry Maids.

Published: June 3rd, 2004

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