Brian Keen from How to Franchise Simply talks to Renew Design and shares three decades experience working within the franchise industry. We discussed a simple strategy to set your business up for growth.
There are a handful of key ingredients that must be in place before a business is ready to expand. When a business owner first looks at expanding the business, they need to look closely at whether they have the right ingredients to open a new store.
The first one is the demand for the product. You have to make sure that there are enough customers who are hungry to buy your product. Secondly, you have to make sure that the business is profitable. A lot of people go out to franchise because they’re desperate to grow and they can’t grow their existing business because it’s not profitable enough. This should be a warning signal.
Lastly, once you know there is a demand for your product and that you can sell your product at a profit, you have to know your business model can handle volume.
Preparing your business for expansion is a process of refining your existing business model. As you move through the stages, you will define and clarify your ideas.
1. Firstly, you have to design the concept of your business. This is your brand messaging, customer experience, marketing strategy and your organizational chart.
2. Then you need to define your business model a bit more by developing budgets and your territories.
3. Once you have a clear understanding of your business model and figures, you can develop the detail of your operations manuals and store style guides.
4. Finally, you are ready to deploy and open new stores.
Develop the Concept for Your Business
Expanding the business is basically taking what you have done and learnt and starting from scratch and saying;
“How will I change this?”
“What will it be like now?”
You may find you need to eliminate some things because they are not profitable. When you expand, keep it really simple. Most successful businesses that grow have a simple flow to them. Break it down to the minimum.
To simplify the operations of your business, start by putting an organization strategy in place. Usually in a small business, the business owner will be wearing several different hats. Before the business is ready to expand, you need to break it down into different segments. For instance, they may be administration, marketing, sales, production, and so on. You then need to describe very simply what those roles are and then list down the key five or six tasks under each one.
Breaking the business down and understanding the key tasks will form the beginning of the operations and procedures manuals. However, before you sit down and write your operations and procedures manuals you need to make sure everything works as effectively as possible.
Define Your Business Model.
Once you have simplified your business model, the next thing you need to do is test your business model. Really look at the processes and expenses for your new store and how this will differ in the new stores to your existing store. Consider store setup costs, suppliers, wages and overheads. Allow for an additional marketing and advertising budget for each store.
For store setup costs, some of those figures won’t be viable when you are doing your preliminary budgets and you will need to revisit them later. Budgets for store fit out will vary for different sites however you should start with a realistic budget figure and refine this as you develop your business model.
Who are your customers? The key thing that most people overlook when opening a second store is understanding the demographics of the area in which you are opening. You need to do some research on the demographics, on the statistics, find out about the profile of the customer you are looking to attract.
There is an idea that is often used in marketing called your avatar. Your avatar is your ideal customer. Profiling your ideal customers before you set up another store allows to look at the demographics in the new area and see how many of your target customers are in the area around your new store. Understanding who your customer is helps you to define your brand messaging and create the experience you want to offer to your customers. This will affect your marketing messages, the language you use to talk to your customers, and the look and feel of your stores.
Develop an Operational Strategy
Once you have defined your business model and customer, you are ready to document your operations manuals. The purpose of your operations manual is to allow you to communicate and train your staff in the operations of your business. You will usually need two types of manuals, comprehensive training manuals and quick reference checklists.
In Franchising, it is pretty much accepted that you need to open a pilot store when you open your first franchise. When you open your first business you still have things to fine tune. You need to test your store design and operational systems with staff. You need to see what works and pressure test your systems to find the holes and the things that you have overlooked.
Open New Stores
In the first few months of opening your new store you will be testing and modifying things. You will test the manuals, equipment, layout and business model to make sure it works as effectively as possible. When you open new stores, you need people who can assume significant responsibility, these may be managers or franchisees. You want them to step up to the mark, not because you’re paying them but because they love being involved with your business.
When you have opened your second store, you need to treat it like a newborn baby. What I mean is, monitor it very, very closely. Bad habits set in quickly, and having a system for monitoring the performance of the business will allow you to have the peace of mind everything is on track.
Expanding your business and opening new stores can be rewarding. Asking the right questions and planning in advance will help to keep the process simple.