Growing pains in your franchise business? Here's how to prevent delays!

You have a successful concept in your hands, you feel that the market is waiting for your formula, you find the first franchisees and you want to continue growing with confidence. It is important to manage growing pains well. Growing pains are part of a growth spurt, but they can also slow down growth. How can you continue to grow towards the next phase with risk awareness?

Surprised by the company's growth

It's a well-known phenomenon with franchise formulas that have had a successful start. The formula starts to take off, the first locations perform well, and before you know it, candidate franchisees line up. Publications appear in the (local) media, you are overwhelmed by attention from various corners, and sometimes it feels like you can't see the forest for the trees.

Here, franchisors are not always well-prepared. They take deliberate risks to facilitate growth, but this doesn't always work out in practice. Often, they manage to achieve growth with the current team and processes. Putting in extra effort can go well for a long time. But there comes a point when the process seriously begins to strain. Things go wrong because of a lack of overview, deliveries go wrong or arrive late, and before you know it, franchisees are dissatisfied.

Create a concrete growth plan and maintain focus!

Ensure controlled growth. A 'multi-year growth plan' helps with this. Consider where you want to be in five years and what you will need in the coming years. Keep looking ahead to the next phase, and base your decisions on this. A helpful tool could be the Franchise Exploitation Model, where a five-year period is planned from the start, showing financial expectations for investments and revenues, and indicating possible growth. Adjustments are, of course, always necessary if income or expenses fall short, or if exceptional opportunities arise, expecting a turnover boost.

From pioneers to ambassadors

Continue giving the first franchisees the attention they deserve. They were the initial pioneers who joined your formula when it might not have been fully developed. Thanks to their experiences, feedback, and learning moments, the formula stands on a firmer foundation. If you continue involving them in further development, you'll reach the next phase together, where they can become your enthusiastic ambassadors; the best advertisement and image enhancer you could wish for.

Don't let success become your downfall! Growing pains are part of it!

It wouldn't be the first time the downside of success has had disastrous consequences. The growth spurt your company experiences puts tremendous pressure on the existing organization. When is the optimal time to scale up at the central level with new employees? Unfortunately, there isn't a clear answer. Personnel costs might run ahead of revenues, but these must sustainably be covered. It depends on the financial position of the franchisor, expected market developments, and the supply of new franchisees.

Nevertheless, there is one piece of advice; don't wait too long to hire the right people in the right places. Recruiting a franchise manager can be a valuable addition to the team to continue supporting existing franchisees. Also, they can look for new locations, optimize profitability, and create training programs to get the best out of franchise locations.

In this hectic growth period, regularly step back and take stock. Get a bird's eye view and expand the team with experienced personnel. This step will ultimately allow you to stay focused on strategic choices and further develop the formula.

Growth requires training!

In every new phase of a franchise company's growth, there are specific elements new to both franchisor and franchisee. For instance, after the initial growth phase, it's good to develop a new marketing strategy with new (recruitment) channels. After the initial busy start-up phase, where most attention went to the operational side, franchisees need to work 'on their business' rather than 'in their business'! Targeted training from the franchisor is almost indispensable for every franchise organization.

Additionally, the franchisor may also need new leadership styles in the changing organization.

Growth requires different communication!

Nothing new under the sun: communication is important at every development stage! However, timely involving and keeping franchisees engaged in the formula's growth might be key to sustainable success. This demands a structured, complete, and manageable communication flow. The best way to do this is by setting up an online communication/knowledge platform. A central place for:

• All news, both from franchisor and among franchisees
• (training) videos,
• A chat function,
• And the franchise handbook

The franchise handbook in an online environment works the most optimally. It prevents discussions with franchisees later saying; I didn't know that, I couldn't find it, when was that procedure changed, etc. The online communication platform ensures everyone is informed simultaneously of news from the franchisor and is equipped with all the knowledge needed to run their business independently and as effectively as possible.

New business activities

It happens regularly that franchisors seize new opportunities during their growth process and take side paths. A butcher who also starts catering, a baker who opens a lunchroom. These developments can also cause growing pains. New work processes need to be established, and different investments are required. What franchisors might not consider is that these new activities also entail other legal rights and obligations.

Seek advice from specialists

Therefore, seek information about such business growth in franchise from franchise specialists. In the mentioned examples of new activities within the formula, there might be an instance of a so-called 'Derived formula'.

A derived formula, as defined under the Franchise Act, is a formula that, in the eyes of the consumer, shows many similarities with the 'original' franchise formula and thus evokes strong associations with that franchise formula. With the enactment of the Franchise Act on January 1, 2021, the franchisor requires prior consent from franchisees if they plan to start a derived formula and these plans may have financial implications for the franchisee.

Good advice saves you time and prevents costly mistakes. Even during growing pains.

Koelewijn and Partners helps franchise organizations to realize growth in every development phase of the franchise organization. We advise you on how to tackle issues or we can do it for you. Alone or with professional partners. Even if you are considering starting in franchising, we can support you.