How to Launch a Successful Regional Developer Program
The most effective regional developer programs tend to be winning scenarios for both the franchisor and the developer.
By Brian K. Miller, CFE
All regional developer programs are not created equal. At its best, a regional developer program can help a franchisor expand rapidly and provide exceptional support. It can also be a fantastic way for an investor to build wealth and equity with no caps on income potential. However, if not implemented carefully, bringing the program into a franchise system could lead to internal conflict and breed maverick regional franchisees. Although the RD model might not be suited for all businesses, franchisors should consider the following practices and insights if launching such a program is a strategy the leadership team is considering.
What is a Regional Developer Program?
A regional developer owns the right to “develop” a territory with a defined number of “units” or “slots.” He has both the right and the obligation to open a certain number of units as prescribed by a development schedule. RDs earn a fee when they sign a new franchise agreement in their territory and usually participate in the ongoing royalties from the franchises in their region. RDs operate in a unique position where they often provide or are an extension to the ongoing support and resources franchisees expect from headquarters. The RD will usually operate at least one unit for income generation, as well as advancing his ability to train and bring on new franchisees. Regional developers are often local liaisons between franchisees and the franchisor. As a result, it’s important that the franchisor consider a prospective developer’s professional background, leadership and management skills before awarding a regional franchise agreement.
Why Consider a Regional Developer Program?
For many franchise businesses, regional developer programs are effective solutions for strategic brand growth within a targeted region. Instead of having to hire more franchise development staff as overhead, the regional developer’s primary function is to fill out his territory. It’s also the quickest way for the individual developer to reach his income and lifestyle goals. RDs usually participate in lead generation, as well as taking franchise candidates from the discovery to the “awards” process. In some cases, having a reliable group of regional developers throughout the franchise system will actually allow the franchisor to more efficiently manage headcount at its support center. Since regional developers typically pick up the opening training and ongoing support once a new franchisee leaves training, it reduces the overhead for additional staff members at headquarters.
What Makes a Good Program?
The most effective regional developer programs tend to be winning scenarios for both the franchisor and the developer. For the franchisor, successful RDs will open new revenue streams via franchise fees and royalties that might have taken longer to develop, with the burden resting solely on the franchisor. The local presence and regional familiarity that an RD provides is often unrivaled. Since their income is based on the success of the local franchisees, RDs have a vested interest in seeing franchisees mature to cash flow with the business as soon as possible. A successful program should offer the potential for a high return on investment to its developers. It’s not only a strategy for franchisors to expand their footprint quickly, it must also provide a solid vehicle for success for the regional developer as well. As they sign new franchisees, train recruits, produce ongoing support and create revenue streams for the franchisors, it’s paramount that their work and influence is rewarded by the system. Perhaps most importantly, a good regional developer program meets the specific goals set forth by the franchisor. If a program is designed to double a franchisor’s presence in a market, but only increases franchise locations by 10 percent, the individual or the program needs to be re-evaluated. Likewise, if the franchisor’s goal is to substantially increase signed agreements via an RD, the business must have the resources to handle those new locations. Don’t let a regional developer program grow out of control.
What Makes a Good Regional Developer Candidate?
Generally, regional developers are often former senior executives with a strong blend of leadership and management abilities. These are people who can inspire a team of franchisees to yield better results, while ensuring the entire region runs smoothly and efficiently. Although they’re already bright and highly skilled professionals, there are still some steps franchisors can take to ensure RDs are operating to their highest ability. As stated earlier, it’s often helpful to provide the developer with a franchise unit to operate. Sharing the franchisee experience equips RDs with an understanding for the specific responsibilities and challenges faced by their regional team, it improves their training ability and they have more wisdom at their disposal as they help award additional franchises.The best candidates are growth minded, proactive and willing to work closely with the franchisor as the entire business grows and evolves. Regional developers must have the ability to inspire a team of franchisees and provide guidance during difficult periods. They must have the patience and foresight to manage a geographically diverse team of franchisees as their businesses will be miles from each another. Lastly, strong RD candidates must have the ability to represent the franchisor as if they were members of the management team at headquarters; all parties must be able to communicate with each other to stay on the same page.
What are the Pitfalls?
Although the RD model has its unique challenges, none are insurmountable. Proper training, management, communication and foresight will keep the entire system running smoothly. Among the pitfalls to beware are maverick RDs, lack of clarity within the communication channels and lack of focus on long-term success. The franchisor must be committed to ensuring that there is an open channel of communication and take into consideration the “boots on the ground” feedback learned from its developers. The amount of responsibility and authority RDs have can actually breed mavericks that fall out of line with the franchisor’s objectives and identity. Either because the developer was misinformed, undervalued or even poorly selected, a maverick could emerge that might intentionally or unintentionally disrupt the system. Keeping an RD in alignment with headquarters’ objectives might only take a few key steps. Ensure developers are present or at least informed of larger brand strategy sessions and management decisions; make sure they are properly trained in brand objectives, identity and messaging; and ensure a clear understanding of franchisor and RD objectives, especially which party has what responsibility pertaining to franchisee relations. One of the most common pitfalls that seems to occur with franchisors and RDs amounts to short-term gains that lead to long-term pains. Sometimes the pressure of signing franchisees within a development schedule leads to a lapse in judgment by a prospective franchisee or regional developer. Developing an ideal candidate profile for both single-unit and regional franchisees and sticking to it when approving franchise candidates is paramount to long-term success. While no one has a crystal ball, adhering to your principles will pay off in the long run. Expediting a signed agreement to quickly secure a franchise fee could lead to headaches later if the franchisee is not fully qualified for the role. Don’t take shortcuts when awarding new franchisees — everyone in the system is a brand ambassador.
Brian K. Miller, CFE, is the chief operating officer of Patrice & Associates, restaurant and hospitality recruiting firm with more than 100 franchisees across the United States and Canada. Find him at fransocial.franchise.org.