Open an L&L Hawaiian Barbecue franchise on the islands, and there’s a good chance that customers will be lining up for the plate lunches. But start a location in Michigan, and it’s likely that you’ll need to serve up an explanation of the brand and the product offerings before you can start dishing out the food. Rita’s Water Ice may sound refreshing to customers in the Northeast, but it just sounds foreign to people in California.
A large part of a franchise’s appeal is the instant brand recognition, but what happens when you take a local brand and try to expand it outside of the area in which it’s known? Will a franchise concept with regional flair truly work in a different part of the country? And what are the pros, cons and challenges that await such a pioneering effort? We asked experts for their thoughts. Weighing in are Lorne Fisher, CEO of Fish Consulting, a national PR and marketing agency that specializes in franchises; Mark Siebert, CEO of iFranchise Group, a management consulting firm specializing in franchising; and John P. Hayes, a franchise consultant and author of several books on franchising.
A franchise’s ability to enter unchartered territory depends primarily on the quality of the concept and the need for the service, believes Hayes. Fisher and Siebert both agree that it’s doable but stress the importance of checking out the existing competition first. “If the regional concept is looking to enter an area with a similar business that has a strong local following, it may be difficult to break through, but not impossible,” says Fisher.
Successfully bringing a concept to new regions can reap great rewards. “The advantages are that you will get in on the ground floor, and if the opportunity takes off, you will reap the highest returns,” says Siebert. As an investor, you might even have bargaining power when it comes to the initial franchise fees, the services provided by the franchisor, the size of the territory, or the rights to sub-franchise the concept, says Hayes.
But along with the advantages come various challenges. Unless the brand’s reputation is so great that it has extended beyond its territory, it will be up to you to lay the groundwork. You’ll need to first educate the consumers about the brand, its products, and their benefits, says Fisher. You’ll also need to create buzz and initial following which will, invariably, require time, effort, and money. “First to market may mean that it will take you longer, or cost you more, to build your clientele,” warns Hayes. “Some people resist new concepts and prefer to wait and see.”
So if you’re considering opening a Culver’s (a popular Midwestern restaurant known for its “butterburgers” and frozen custard) in a West Coast city, or a Waffle House (a well-known brand in the deep South) in a northern state, make sure to do your research beforehand. Fisher recommends testing out brand familiarity in the area where you’re planning to open your franchise by seeing whether the locals are familiar with the concept. Then, analyze the market for competitors and trends related to the industry.
You’ll also want to see how prepared the franchisor is for expansion outside its core area and find out what kind of support you can expect to receive. “To succeed, the franchisor and franchisee need to recognize that a different marketing approach, product mix, etcetera may be needed to succeed in a new market,” says Fisher.
A good franchisor will provide assistance and support no matter where you are located Says Siebert, “The franchisor should have a market entry strategy for new markets that will allow the introduction to go smoothly, and, in most instances, should not simply sell a single franchisee in these markets without a plan for further market penetration.”
But in order to know what you’ll truly be up against, make sure to ask the franchisor the right questions. Hayes offers the following as a good starting point:
- If you’re all alone in a market, will the franchisor visit regularly?
- Will you be able to get the training and ongoing support that most franchisees require? Or will you have to pay an additional fee for that support?
- How good is the franchisor’s network of contacts in your part of the country?
- Will the franchisor be able to help you find real estate or build a relationship with a bank?
- If you need certain supplies, can you get them, and can you get them at a price that will make sense for your business?
- Are there cultural issues that the franchisor may not be aware of that could impede the development of your business?
Up for the challenge? Go in prepared, and you’ll be in a good position to reap the rewards later on. “Ultimately it comes down to delivering a product or service that people need and operating efficiently and effectively,” says Hayes. “Businesses that fail when they expand into another part of the country don’t fail because the concept isn’t a good one. They fail because the operator wasn’t a good one — the operator didn’t have the financial wherewithal or the business savvy to make the business successful.”
Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at firstname.lastname@example.org