Overcoming Flat or Negative Franchise Growth in 2013
by Ed Teixeira
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
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
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.
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
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 firstname.lastname@example.org