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Overcoming Flat or Negative Franchise Growth in 2013


The franchise industry is still growing, but not as fast as it used to. Here are some tips for franchisors that are experiencing flat or even negative growth.

A recent International Franchise Association economic outlook survey for 2013 predicted that franchise establishments will grow by 1.4 percent in 2013, which is slightly lower than the 1.5 percent growth in 2012. A lack of strong franchise industry growth will lead to some franchise systems contracting as they vie for franchise prospects. As franchise segments like home care and childrenís services experience healthy growth other franchise industry segments will be contesting for a smaller universe of qualified and interested franchise prospects. Factors including a tight credit market, tax increases, a fragile economic recovery and Obama Care have created anxiety and a more competitive climate for adding new franchisees. How can franchisors that are experiencing flat or negative growth meet the challenges?

Here are some suggestions:

Weather the Storm

Although this approach may appear to consist of throwing in the towel for 2013, a strategy of strengthening existing franchise market positions, assisting current franchisees that qualify for more locations and taking steps to strengthen the current franchise network will pay dividends in the future. It might make sense for some franchisors to invest in their current franchise system versus spending capital trying to add new franchisees in a difficult business climate.

Fine Tool the Franchise Program

Now is the time to take an objective look at the franchise program to confirm that the franchise operation including the franchise, royalty and ad fees provide a new franchisee the best opportunity for success. In a tight franchising market candidates will be more critical and discerning as they seek the best franchise opportunity for them. A smaller piece of the pie is better than no piece at all.

Consider Franchisee Finance Programs

More franchisors are either financing the initial franchise fee or offering other in-house financing programs that assist new franchisees. This doesnít mean that every franchise candidate will require financing but rather that the qualified candidate that lacks all of the capital can obtain some assistance. There are ways to provide financing to select franchise candidates by having qualification guidelines such as industry experience.

Conversion Franchising

Some franchise systems lend themselves to a conversion franchise program. It can be an opportunity for an independent business to become part of a network with a recognized brand name that also can provide a sense of security to the business owner. An inducement for a conversion franchisee can be a royalty fee schedule that starts at a low percent and includes incentives as it increases. The Dwyer Group has had considerable success using this approach to attract conversion franchisees.

Have all the Tools in Place

Be sure that the franchise support systems ranging from training to operational support are in place and can survive the scrutiny of a franchisee evaluation. When a prospective franchisee evaluates the franchise and speaks with existing franchisees one of the worst outcomes is negative feedback regarding franchisor assistance and support.

Alternative Sources to Prospect Franchise Candidates

A majority of franchisors follow the same formula for generating qualified franchise leads, whether itís from the ad portals or trade shows. Consider bringing the franchisor team together for a brainstorming session in order to uncover alternative sources for new franchise leads. In some cases industry trade shows and publications can be a good source of new leads and the cost might be much lower than traditional franchise lead generators. Another source of leads is from social media, which can be very inexpensive. Finally, the right PR team could be helpful.

There is little doubt that 2013 will be a challenging year from a number of franchisors. Franchisors that are finding it difficult to grow their franchise network in this environment should consider some of these suggestions.

© 2013 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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