Franchise Expansion
What it is
Business networks can expand in a variety of ways, the most frequent of which being franchises, own units, brand licensing, and brand representation or commercial representation.
Regardless of the choice chosen, increasing the network business necessitates strategic planning and technical studies with qualified and diverse personnel, particularly if franchising is chosen.
If you’ve come to this page, it’s because you’ve considered turning your business into a franchise but aren’t sure if it’s right for you. So, before we proceed with the franchise expansion plan, we included some vital points here.
The first question to consider is whether or not you have a positive role model. It’s worth noting that this is about much more than a fantastic product or service. Your company must be profitable and produce results. Customers must be satisfied; after all, customer satisfaction is the best sign of a company’s success. Do you have a set of behaviors that you can teach to a new partner? Another evidence of success is that the company’s employees are pleased and committed.
All of these questions are important because franchising is a system by which companies scale through third parties. The franchise concept is applied in cases where a company – franchisor – grants the use of the right to use its brand to a franchised partner, in addition to products or services when applicable – with the consideration of applying some fees.
However, the main differential of franchising with other expansion models is that the model can only be effectively considered a franchise if the franchisor’s know-how is passed on to the franchisee.
How We Do It
FORMATTING THE FRANCHISE EXPANSION BUSINESS MODEL:
Before beginning to sell franchises, the potential franchisor should consider the following procedures while formatting the franchise model. The importance of preparation is critical to the expansion’s success. Often, and it is suggested, the organization will require special assistance to complete all of the steps.
The following important steps should be considered when formatting the franchise expansion model:
BUSINESS PLAN: The business plan, which is sometimes known as franchising or feasibility analysis, is concerned with the brand’s expansion strategy. Even if the company has already decided on a franchising expansion strategy, the franchising study will determine whether this is the best option for expansion and whether the organization is truly equipped for it.
They are evaluated in this analysis based on a macroeconomic environment, a market scenario in which the consumer is placed, and trends, as well as rivalry in the segment and franchising. Analysis of existing business models, as well as their suitability for expansion.
Often, the model that the customer wants to expand is not feasible to scale via franchising because it does not allow the franchisee to return on investment on time – this could be due to a very expensive operation to implement or that does not include the franchisee’s remuneration with the business and the payment of fees to the franchisor, and this can only be discovered with thorough financial analysis.
Financial spreadsheets aid in calculating the worth of system fees, such as the franchise fee (an investment made by the franchisee to join the network) and the royalty fee (a monthly cost that compensates the franchisor for all services rendered).
LEGAL INSTRUMENTS: It is about the evaluation of contractual assumptions and the preparation of legal instruments relevant to the expansion of franchises.
It is worth mentioning that some criteria must be respected to determine the term of the franchise agreement, such as the return on investment and the terms of the lease agreements, for example.
- Movement of Franchise Offer: The Movement of Franchise Offer is an explanatory document that is meant to help the Franchise candidate decide whether or not to join the Network. It should be delivered to the candidate ahead of time so that he has enough time to consider the franchise.
- Franchise Pre-contract: The Pre-contract is a preparatory instrument for the relationship between Franchisor and Franchisee, which establishes pre-operational measures to be taken. There is nothing to talk about Franchise operation in the pre-contract stage.
- Franchise Agreement: The Franchise Agreement is the instrument that seals the relationship between the contracting parties, it is from its signature that the candidate effectively becomes a Franchisee and becomes able to implement and operate a Franchise.
PROCESSES AND MANUALS: Franchise processes are structured to aid franchisees in conducting business according to defined standards and to serve as a foundation for educating franchisees and their teams.
Franchise expansion is based on the replication of a business concept that already exists in another area or market, with the franchisee and franchisor functioning in an interdependent relationship.
It is a necessary relationship for the company to continue to operate. In general, for a franchise expansion partnership to be successful, all parties must work together and support one another.
When replicating a business model for franchisee expansion, it is necessary to make sure that the business is well structured in terms of the concept and format of the model, the profile of the franchisee you want to seek, and the network’s support structure.
INSTRUMENTOS JURÍDICOS: Trata-se da avaliação das premissas contratuais e elaboração dos instrumentos jurídicos pertinentes à expansão de franquias.
Vale dizer que alguns critérios devem ser respeitados para determinar o prazo do contrato de franquia como por exemplo o tempo de retorno do investimento e os prazos dos contratos de locação por exemplo.
- Circular de Oferta de Franquia: A Circular de Oferta de Franquia é um documento explicativo, utilizado para formar a convicção do candidato à Franquia, se quer ou não ingressar na Rede. Ela deve ser enviada com antecedência para o candidato para que ele possa ter tempo de se decidir de fato pela franquia.
- Pré-contrato de Franquia: O Pré-contrato é um Instrumento preparatório para a relação entre Franqueadora e Franqueado, que estabelece medidas pré-operacionais a serem tomadas. Não há o que se falar em operação da Franquia em fase de pré-contrato.
- Contrato de Franquia: O Contrato de Franquia é o instrumento que sela a relação entre as partes contratantes, é a partir de sua assinatura que o candidato vira efetivamente Franqueado e se torna apto para implantar e operar uma Franquia.
PROCESSOS E MANUAIS: Estruturação dos processos da franquia para orientação do franqueado na condução do negócio conforme os padrões estabelecidos, servindo de base para a capacitação dos franqueados e sua equipe.
A premissa da expansão de franquias é a replicação de um conceito de negócio já existente em outro local ou mercado, operando com base em uma relação de interdependência entre o franqueado e franqueador.
Trata-se de uma parceria fundamental para que o negócio possa continuar a dar certo. Em linhas gerais, para que a parceria da expansão de franquias tenha êxito com efetividade, é necessário cooperação e apoio das partes.
Ao replicar um modelo de negócio para expansão de franquias, é necessário ter a certeza que o negócio está bem estruturado em relação em termos de conceito e formatação do modelo, perfil do franqueado que se deseja buscar e estrutura de apoio à rede.
THE FRANCHISOR'S STRUCTURE
The moment has come to focus attention on the franchisor’s structure, with a focus on managing the franchise network, following the completion of the research and creation of technical documentation that proves the viability of the business for franchise expansion.
AREAS AND POSITIONS: structuring of the franchisor’s own areas and which, eventually, can be shared with the existing structure, as well as the positions necessary for the demands, including the hiring profile and responsibilities.
PROCESSES: definition, modeling, and description of the processes that generate the franchisor’s manuals, to standardize activities and ensure support to franchisees.
TOOLS (TECHNOLOGY): description of tools to support the franchisor’s processes in franchise expansion and network administration, such as systems that bring together the necessary tools in field consulting activities, franchisee selection, network relationship portals, and training platforms, among other things.
It is vital to ensure the network’s long-term viability by reinforcing the concept of interdependent collaboration between franchisor and franchisee, offering support to the franchisee throughout the contractual relationship, and being concerned about the company’s success.
EXPANSION PLAN: In search of the ideal franchisee
The foundation of franchise expansion is defining the profile of the franchisee to be prospected and selected to be a part of the business network, which is necessary to efficiently manage the network, and to do so, it is necessary to understand and align the needs and skills of franchisees and the franchisor.
One of the cornerstones of franchise expansion success is defining the franchisee’s profile, as it allows for the mitigation of risks associated with a lack of knowledge and experience in managing the business by selecting suitable entrepreneurs or managers.
It is feasible to boost the chances of network expansion and growth in this way. Among other things, the franchisee must be linked with the business model, have an entrepreneurial spirit, and have knowledge in the field of operation.
When it comes to franchise expansion, the franchisee must regard the collaboration as an opportunity to pursue a tried-and-true business strategy with a prominent brand, allowing for a more risk-free start and constant exchange of experiences. As a result, its purpose is to work with the franchisor to support the system, optimize sales in its operating zone, and take over management of the company, focusing on:
– Develop actions to attract and retain customers;
– Focus on a good relationship with the customer through after-sales actions, getting to know your customers;
– Control cash flow;
– Take care of the day-to-day business;
– Increase results with dissemination and expansion of the customer base;
– Define short and medium-term actions to increase profitability;
– Be a team builder, empowering hired professionals in their responsibilities, constantly motivating them, and managing people.
How to reach franchise candidates
It’s vital to note that the franchisor plays two functions in the network’s expansion. One is vertical, in which franchisees are encouraged to invest in more than one unit, and the other is horizontal, in which new franchisees are added to the network, allowing the market to be occupied more fully.
A very clear direction is also required to approach these candidates. The market is being provided a business opportunity rather than a branded product or service.
The focus is completely different.
To publicize the opportunity, the franchisor must prepare a complete marketing plan considering portals specialized in the system, a database of people interested in franchising, social networks, participation in fairs and events, business presentation lectures, roadshows, and others.
It is also worth considering the high attraction potential that satisfied franchisees have for new candidates. There is nothing better than someone achieving success with the brand, giving the go-ahead for the business. Once again, network management is also fundamental for expansion.
The brands supported by the BITTENCOURT Group
The BITTENCOURT Group assists some chains in the process of finding and choosing candidates for franchise operations.
We collaborated with the franchisor to develop a marketing and communication strategy aimed at attracting investors. The goal is to raise brand awareness in the franchise industry. We make considerable use of the Portal Your Franchise, the largest portal specializing in franchising business prospects, to support this objective.
FRANCHISEE SELECTION: A process that begins with the evaluation of the profiles of candidates who have expressed interest in the brand through the communication channels defined in the marketing plan. Initial information is collected for a first filter regarding the candidate’s suitability for the franchise. For example, investment capacity (not yet proven).
PROFILE ANALYSIS: All information submitted by candidates will be analyzed and validated by the selection team. At this stage, the candidate is required to provide a series of documents – which will even serve to prove his financial capacity – in addition to profile analyzes such as DISC, which aims to identify whether the candidate’s characteristics and abilities are aligned with the profile desired by the brand.
FRANCHISE PRESENTATION: A complete presentation of the franchise business model to interested candidates. In addition to presenting the business with more details, such as income statements, long-term vision, franchise differentials, etc., this is also a good time to get to know the franchisee better. Your expectations with the business and your profile.
CANDIDATE’S REPORT: A candidate evaluation report will be presented to the client, which will help the franchisor to decide on whether or not the candidate will join the network.
Information such as candidate and potential partner documents, financial proof, profile test results, and other information is presented.
BIG BRANDS TRUST THE BITTENCOURT GROUP TO EXPAND THEM. MEET THEM.
Turma da Mônica Stations are innovative and interactive. They have sizes ranging from 800 m² to 2,000 m², with attractions for shopping centers, since the entertainment and family life areas have gained prominence among the leisure options.
The Turma da Mônica station, due to its business model, is a FEC (Family Entertainment Center), whose core business is licensing.
Le biscuit continues to grow. And now you can be part of that success with the Le biscuit franchise.
We are a brand with 50 years of history and more than 140 own stores and 5 franchises, offering a variety of categories and products.
Ri Happy, a toy retailer, with 30 years in the market, today has more than 200 stores spread across all over Brazil, in the main capitals and the interior of several states.
In them, the customer has at his disposal specialized and well-trained employees, always ready to make dreams come true.
Why
The option to broaden one’s horizons presents both opportunities and obstacles. As a result, expanding a brand necessitates a detailed strategic plan developed by a professional firm that can determine where the brand should focus its efforts and which areas have the most potential of absorbing the model in order for it to succeed.
It’s a mistake to focus solely on “franchise sales” without considering other aspects of the business, like the product’s or service’s consumption potential and receptivity in the target market.
The growth study of the BITTENCOURT Group is founded on the premise that each unit installed should be another step toward boosting the brand and towards the franchisor’s profitability.
RESULTS ACHIEVED
With an expansion study carried out by the BITTENCOURT Group team, the entrepreneur will have, at the end of the project, the definition of which channel offers the best control condition, better costs, greater brand capillarity and the possibility of penetration of products or services in the target market.
