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Put the ‘Work’ in Working Capital – Taking your Franchise to the Next Location

Dec 4, 2018

Deciding to expand your franchise isn’t easy. With the right research and preparation, you can double your profits. Without it, your expansion may drastically fail. Failed franchise expansions may be due to unplanned growth, insufficient funding, inadequate market research, and unskilled management. One thing is clear when it comes to franchising, you either expand or expire. Franchising comes with its own unique dynamics and experiences. Once you’ve grasped them, you can turn your business franchising into a success.

Is your Business Expansion Ready?

  • Fully penetrate your home market: Before you can think about expanding your business to a second location, ask yourself if your business has been able to overcome all hurdles on the homefront first. Have you fully penetrated your home market? Are you the “top producer” in your location, besides any friendly-competition you may have? If you aren’t able to answer yes to these questions, you may want to consider what’s holding you back. Expanding to a second location doesn’t guarantee success so if you haven’t satiated the customers in your current location yet, you may want to reconsider your business plan.
  • Gauge your Business’ Strengths: It’s a common misconception that the best way to make profits is by expanding to a second location. If your business is not already generating a profit or a positive cash flow, this can be a disaster. If your store is dependent on traffic from nearby stores you may want to question if you’ll enjoy the same traffic if you expand to a new location.
  • Perfect Your Business Plan: Even if your business has been successful in your current home location, it doesn’t guarantee that it will be successful in another location. Maybe, you’re a popular name in your locality, but you will have to start from scratch elsewhere. The best way to be confident about your business’ success is to take a look at your business plan. Is your business scalable? Is it economically feasible? You can take your business plan to a business consultant in case you’re unable to answer these questions yourself.
  • How much does your business need you? Do your business and your store traffic depend on your physical presence? If the answer is yes, you may need to consider finding someone just as knowledgeable and charismatic to run your second store. If you have customers who are happy with your business even without you physically there, it’s a good sign to continue with an expansion.
  • Expanding is the last thing left: If you’ve exhausted all other cheaper alternatives of expansion, such as by creating a website and your social media has made effective reach- the only thing left to boost your business is to take it to a new location.
  • Adequate Financing: Once you’re sure that your business is ready to franchise to a different location, it’s important that you find adequate financing to expand. You’ll need the working capital to purchase inventory, hire staff, rent space at a new location, etc. and you’ll need to put in the work to get all of this done. The quickest source of financing available can help you get started on your expansion right away.

The Expansion Strategy

  • Know thy customer: Expanding your business to a second location means building a new customer base and reaching out to customers similar to those who already favor and patronage your store. Before exploring the second location, identify your current customer base. Take a survey of your customers, taking into consideration their age range, occupation, number of transactions, spending patterns, purchasing powers, shopping cart details, visit to the website, etc. and other factors that may help you build a strong marketing campaign and establish target customers for your franchise in the new location. You can study your customer base through pre-published Public Survey Reports which carry statistical rigor and cover a significant population base. Otherwise, you can get the survey done through an agency or as a private survey from your store or online.
  • Prioritize Expansion Areas: Choosing the wrong location can kill a prospective franchisor faster than any other factor. That’s why this is the most important aspect to research on before expanding. The best pattern to grow in the initial stages of franchise expansion is as geographical small concentric circles around your first location. Prioritize your next location based on internal and external logistics. Your internal logistics are inclusive of factors like costs (to cover the distance, time for expansion) brand image, strategic priorities, etc. Your external logistics include potential marketing, socio-demographic, the price of land, costs of inventory, hiring staff, etc. Fortunately, there are several tools for location intelligence that can help you out.
  • Expansion Operations: Last but not least, once you have the location of your franchise sorted out as well, all that’s left is to plan out the operations in your new store. Designing interiors, hiring staff, stocking up inventory, building computer networks and intranet, and planning an epic marketing strategy can be quite exhausting. Get people to know you and your brand in the new location by taking up leadership opportunities, participating in local events and building awareness around your store in the new community.

Getting ahead of yourself and starting expansion before your business concept has fully developed can be fatal for your business. Expanding your franchise in a new market is an investment and requires time, human resources and money. Failing to give each of these their due importance can result in a failure of your business. Learn from your mistakes, and don’t be afraid to re-strategize and try again. Once you’ve figured out the best way to franchise your business, your business can only go one way up from there.


$3,098,641,569 dollars funded