How Franchisees Can Save Time and Money When Opening New Locations

When taking the leap into expanding your franchise business, it’s important to consider how to grow without spending unnecessary time and dollars. Research, outside experts and managing costs can help maximize your return on investment.

By Mark Belanger, CFE

Achieving success comes from passion, so when a franchisee is faced with a decision to expand, they should be sure their business it something they love. It will quickly become evident that jumping into just anything without a connection to the business is a waste of both time and money.

Taking this idea a step further, when franchisees decide to take the leap and open additional locations, they’ll typically pose the following question to themselves: How can I expand my business and achieve success without spending unnecessary time and dollars? I’ve worked for years in the consulting arena and have guided many franchisees through plan development and execution of growing their business to multiple locations, shedding light on tools and resources they can use in an effort to maximize their time and investment, and key points they should focus on to make the process as seamless as possible.

Research

When making the decision to invest in a franchise, research is key. Many franchisees run a search of the company’s name on the Internet to see what comes up. They also look at their social media platforms to see what customers are saying. These are both great first steps, but the best insight comes from those who are already on the inside.

Proper due diligence is a critical step when making any investment, so it’s important that prospective franchisees interview as many successful multi-unit operators in the system to get a firsthand account of their experience before considering opening additional units. They should also heavily vet direct revenues and costs associated with the particular business model on a per unit basis, or unit economics, to ensure there’s proven success.

Outside Partners and Experts

It’s important for franchisees to remember that they don’t have to do everything themselves, especially when dealing with more than one location. Taking on too much can lead to trouble throughout the process. When you’re spread too thin, it’s easy to lose sight of details, which can end up hiking up costs and delaying the development process. Whether it is real estate or construction management, the time and money you save in the long run by hiring experts in such areas exceeds the investment in their services.

It’s also worth the extra time vetting these outside sources to make sure their values and goals align with those of you and your business, as having a mutual understanding of expectations will make for a strong and efficient partnership. And if the time comes to bring in outside investors, be sure each person’s role is clear up front with well-defined responsibilities and expectations to avoid internal mayhem down the line.

Development Costs and Managing Rent

Having a clear idea of the costs you’ll accrue through the development process is a key component to keeping yourself in good financial standing. Being budget-conscious and frugal is good, but cutting the wrong corners in an effort to lower overall development costs usually has the opposite effect and ends up costing the franchisee more money.

When it comes to managing rent for a single location, the process is typically straightforward and easy to keep track of. But not having a full understanding of what monthly rent entails can cause conflict when it comes to managing these payments for multiple locations, as there’s more to it than just base rent to worry about. For instance, a “NNN Lease” is structured as a turnkey investment property in which the tenant is responsible for paying the three major expenses associated with commercial real estate ownership — property tax, insurance and maintenance. These can sometimes add up to be more than the base rent, so it’s crucial that these expenses are clearly understood during the negotiation process.

It’s not a secret; everyone wants to save money and time when setting up a new business. Especially when you’re expanding that business beyond a singular location. There are many things to take into consideration that lend a hand in saving time and cutting costs, but it all comes down to franchisees doing their due diligence, as a thorough approach will stifle financial surprises and time delays along the way.

Mark Belanger, CFE, is vice president of Global Franchise Operations and Development for CraftWorks Restaurants & Breweries.