Transitioning from a Company-Owned to Franchising Go-To-Market Approach

December 09, 2016

Change isn’t always welcome because of the short-term disruption that comes with it, but it’s often the best long-term option, and when adequately planned will go smoothly.

By Jim Lewis

Among the most important considerations a new business faces are its go-to-market approach. On the one hand, owning and operating all of your retail locations affords the greatest potential of control, and along with it all of the entrepreneurial and operational responsibility that comes with exercising that control. On the other hand, franchising your retail locations trades a degree of control for a sharing of operational responsibility and financing, and taps the abundance of entrepreneurial talent in the world that yearns to own their very own business. Of course a third option is doing both, as many successful companies do across several industry segments today.

Marilyn Monroe Spas launched with a completely company-owned approach to providing spa and salon services in both stand-alone day spa locations as well as at luxury spas in major hotels and resorts. After a few years of operating with this approach we revisited our decision to “go it alone” and determined that franchising could play a pivotal role in our company’s future. In short, we decided to transition our go-to-market approach for the day spa segment of our business to franchising, while retaining the company-owned and operated approach for our hotels and resorts segment.

Every business with material growth aspirations should evaluate its go-to-market approach from time to time. For those not currently utilizing a franchising approach, its merits should be carefully weighed. While there are many advantages to franchising, they will apply to different businesses in different ways, and in different degrees. For us, speed to market, shared financial investment and the ability to work with entrepreneurs who had a deep understanding of, and commitment to, their local markets were strongly compelling factors to pivot toward franchising.

The following tips are based on our experience in thinking through and effecting this transition, which we firmly believe offers a more robust success path than our original approach.

Tip 1: It’s not necessarily an “either or” decision

Being a franchisor and being an owner-operator may both have characteristics that provide strategic advantages to your business. For example, owning and operating even a small percentage of your locations gives you a higher level of direct end-customer engagement than you would normally enjoy as a franchisor alone. We found that the knowledge we gained as an owner-operator enabled us to develop a stronger franchise concept and value proposition as a franchisor than we would have otherwise, and gives us the ability to “put ourselves in the shoes” of our franchisee partners. We believe that continuing to own and operate some of our locations will sustain this advantage. Don’t think of these go-to-market approaches as being mutually exclusive — the right decision for your business might be one or the other, or a hybrid of the two.

Tip 2: Prepare for the Transition from Star Pitcher to Manager

If you’ll indulge a sports analogy, transitioning from company-owned to franchising is analogous to going from being a baseball team’s star pitcher to being its manager. Running your own operation, you get to make more or less all of the decisions — locations, hours, hiring, firing, pricing, promotion and so on. It’s up to you to make the pitches and get the outs. As a franchisor, you choose who your franchisees will be much like the baseball manager decides who will take the mound, but in the end it is they, not you who makes the pitches. Mentally and functionally preparing yourself for a role that is characterized by disciplined franchisee selection, training, guidance and facilitation rather than absolute control is an important factor in a successful transition.

Tip 3: Amp Up Your Support Resources

A pivot towards franchising means you will have proportionately fewer company employees per location than you do as an owner-operator. That reduction at the retail location level and elsewhere in your business will be necessarily offset by your need to increase your support operations to do everything from market to, screen and select franchisees, to provide substantial initial and ongoing guidance and support as they launch and run their businesses. This is in addition to keeping your franchise concept and related offerings at the leading edge of competitive franchisee and end-consumer marketplaces. Generally speaking, your franchisees are not going to know your business as well as you and your current owner-operator team do. While your franchise concept will facilitate their entry into your industry, franchisees are still going to need some time and assistance in learning your business — if they don’t succeed neither do you.

Tip 4: Brand Matters

Brand strength is critical in any go-to-market approach, but we have found it to be especially critical in our franchising operation, for two related reasons. First, the franchise marketplace is a vibrant one — potential franchisees have lots of choices in virtually all business categories. Brands that clearly stand out from the crowd have a better chance of being noticed, creating more opportunities to sell your concept. Second, strong brands similarly stand out in a crowded consumer marketplace. A strong brand is another asset in the arsenal of support franchisors provide that can be key to their partners’ marketplace success.

For those transitioning from an owner-operator to a franchise go-to-market approach, the “carrying capacity” of your brand into a national or international marketplace, particularly if your market penetration as an owner-operator was highly localized, is a key consideration. Make an honest assessment of how your current brand will play on a potentially much larger stage, and if necessary, make adjustments.

Finally, don’t lose sight of the fact that the transition to franchising compels you to manage your brand in new ways that take into account the fact that a coalition of affiliated independent businesses is increasingly becoming its face to the marketplace. An obvious point here is enforcing brand standards, but the broader, and an ultimately more critical point is evangelizing your brand message and brand values at every opportunity with your partners. The more deeply they embrace and “live” the brand, the stronger it will become.

Times change, economic conditions and markets change, consumer needs and attitudes change. How you go to market should be able to roll with those changes to maximize the success of your business. Change isn’t always welcome because of the short-term disruption that comes with it, but it’s often the best long-term option, and when adequately planned will go smoothly.

Jim Lewis is CEO of Marilyn Monroe Spas.