Franchising has long been a proven growth strategy for restaurant brands, offering the potential for high returns. However, the path to success is not always smooth. In fact, many franchisors struggle to scale effectively, leading to poor sales, closures, or outright failure. For every new franchisor entering the market, another exits, and the reality is that the mode of franchises sold in a year by all registered franchisors is near zero. The challenges are significant, including high ongoing costs for franchisors, which can easily exceed $1 million annually.
So, what does it take to avoid these pitfalls and unlock the full potential of franchising?
Understanding the Key Elements that Drive Rapid Growth
- Effective Brand Development: Building a strong, appealing brand is essential not only to attract customers but also to inspire potential franchisees. Demand is hard to manufacture, so critically evaluate and position your brand to serve the market. A well-developed brand differentiates your restaurant in a crowded marketplace and communicates the core values that franchisees can adopt. Franchisees are more likely to invest in brands that have a proven track record and a clear, compelling identity.
- Evaluation and Optimization of Systems: Franchise success fundamentally depends on efficient operations. The ability to streamline processes, from supply chain management to employee training, ensures that every location operates consistently and meets customer expectations. Standardizing operations not only reduces costs, but creates consistency, thus leading to measurable customer satisfaction. An optimized system allows franchisees to replicate the model seamlessly and rapidly, minimizing the risk of operational hiccups that can slow down growth.
- Franchise Development and Documentation: One of the most critical components for scaling a restaurant brand is robust franchise development. Creating a comprehensive, clear franchise model is necessary to communicate the structure and expectations for new franchisees. Documentation is important, but flexibility in development is key: franchisors should understand what points are “must have” non-negotiables for the brand. Franchisors should also provide ongoing brand updates, refreshes, and continuous improvement, helping their franchisees stay competitive in the marketplace.
- Marketing Strategy Execution: Franchise brands must have a strong marketing strategy that speaks to their niche, rewards loyal fans, drives awareness, and induces trial from new customers. That’s a tall order, but whether it is a digital campaign or a local promotion, the key is having a integrated marketing strategy to build customer loyalty while generating sales. It takes both franchisor and franchisee working together in tandem. Franchisors must support franchisees with effective and flexible marketing tools and strategies to ensure consistent brand messaging across all locations. Leading a robust online presence on social media is particularly important in today’s marketplace to reach a wide audience.
- Ongoing Training and Support: Franchisors must invest in comprehensive training and ongoing support for franchisees to ensure they have the tools needed to operate successfully. You can’t just “set it and forget it” – ongoing training should exist throughout every part of a franchisee journey. Training should cover everything: food preparation, customer service, employee satisfaction, financial management, local marketing, etc. By continuously improving franchisee skills and offering support, you help your partners thrive, which in turn accelerates brand growth. Franchisee profitability is the ultimate success measure, not just top-line sales.
- Financial Planning and Cost Management: Navigating growth through franchising requires careful financial management. Franchisors must be prepared to invest in the development of their franchise infrastructure, including legal costs, training programs, marketing campaigns, and support systems. It can take years for a franchisor to see returns on the investment of setup, development and infrastructure! Be patient, but be prepared: without proper financial planning, the costs can spiral out of control. Developing a strong financial model that includes clear cost projections for both franchisors and franchisees is crucial for long-term success.
Implementing these strategies will help restaurant brands avoid common pitfalls and achieve the scale necessary for long-term success. Franchisors must be prepared for the complexities of expansion, focusing on building a strong brand, optimizing systems, and providing robust support to their franchisees. By fostering a strong partnership and supporting franchisee growth, restaurant brands can unlock their full potential and achieve sustainable expansion.
Lauren Fernandez is the CEO and Founder of Full Course, a restaurant consulting, development and investment firm which incubates and accelerates emerging food and restaurant brands, guiding brand owners through a process of optimization, strategic growth planning and development. She is also the Managing Partner of the Full Course Funds, which support rapid expansion of founder-led restaurant brands through early-stage, minority investment. Lauren is an industry veteran with over two decades of experience as an attorney and entrepreneur, with extensive expertise in restaurant and franchise operations and development, consumer product development, and brand licensing. She has worked in over 140 countries establishing franchise partnerships, licensing programs, distribution and supply chains for both food and drug companies. She served as General Counsel and Head of Franchise Administration for FOCUS Brands, and then as the owner/operator of 11 Chicken Salad Chick franchised restaurants. Lauren holds an MBA and Juris Doctor from Emory University, and is a Certified Franchise Executive.
