When choosing locations for your franchise to expand into (or to open if you are just getting started), there are a bunch of factors to consider. If you would like help with advice, we are a franchise consulting company, and this is one of the many things that we can absolutely help with. There are a lot of factors to consider, however, here are five important ones that stand out.
It’s important to establish the size of the market where you will be opening your new location. It’s important to check public records data to find out things like population size and density. We want to make sure that the market that you are planning on moving into is large enough to support your business based on other sales and profit margin data in other markets.
Market strength refers to how strong of sales projections we can assume. A franchise that sells to other businesses will typically benefit on a large market size, however, only if there are a lot of businesses located within that market. Typically, any large market is going to have a lot of commerce and businesses, but it’s not always the case. Market strength factors in the percentage of the market size that might actually qualify as a potential prospect.
Order of Expansion
Not only is it important to consider which markets to expand into, but also which order in which to expand. There are many factors when planning a strategy of expansion, which takes years of experience in order to perfect. We like to lay out a strategy that best fits the particular franchise at that point in their growth. It may be advisable to expand into smaller markets first, and then into larger markets where there is more competition. In other situations, it might be advisable to do the opposite.
It’s important to consider the amount of competition in the market that you are planning on opening in. If you are a smaller franchise, it may be advisable to open in less competitive markets where it will be easier to gain a foothold and a following. Conversely, in some situations it makes more sense for a new franchise to open up right down the street from their biggest competitor and take them head-on. It really depends on the franchise and the products or services they sell.
We like to create a grading system for how desirable a particular city or market may be for our client to expand into. This helps us get an overall idea of which areas are generally going to have a better chance of success for our client, as well as how to create a priority list of expansion (where should the next store be opened).
At Upside Franchise Consulting Group, we help existing franchises grow and operate more efficiently. We also help small businesses to franchise their concepts. If you have any questions, give us a call. We offer a free consultation.