Adding a Franchise to Your Existing Business

Why more entrepreneurs are choosing to expand their businesses by hooking up with a franchise.

Adding a Franchise to Your Existing Business

The entrepreneurial spirit is alive and well. One of the reasons it is so fascinating to watch entrepreneurs is that they are always thinking of and testing different strategies to build larger and more successful businesses. Though there are occasional setbacks in what is often a process of trial and error, the winners tend to lead the charge to new approaches to business expansion and development.

One of the areas where we are seeing this dynamic is with existing business owners who are adding new franchise businesses to their current operations.

Traditionally, the two main approaches to growing a business are “horizontal” or “vertical” expansion. In this new dynamic, what we are seeing is called “synergistic” expansion, and franchising is a leading force in this trend.

The differences between these three approaches to expansion are:

1. Horizontal Expansion.

This most traditional of growth strategies simply means you increases your business by doing more of exactly the same thing you have been doing. This is normally accomplished by adding more units to your existing operations or trying to increase the average volumes of the units you already have.?

2. Vertical Expansion.

This growth strategy involves growing your business by expanding the operation to include functions directly related to current business that you are not currently engaged in. Examples of this might include upstream expansion via the purchase of one or more of the supplier companies that currently sell to the business.

Or it could also mean downstream expansion via something like a strategy of selling directly to the end user of the business products rather than using a rack jobber or other middleman to handle distribution.?

3. Synergistic Expansion.

The new trend of synergistic expansion is a different strategy than the two traditional models. This is where you attempt to leverage the existing infrastructure components you have already created to support growth that, though not directly related to the current business you have, has some synergies you can take advantage of.

The infrastructure component that you’re leveraging in this approach is typically one or more of the following assets from your existing business:

  1. Current Customers. Your existing business has customers and in many cases, your motivation is to get a new franchise business that can result in additional sales to these current customers.?
  2. Current Staff. Your existing business has employees and your motivation is to try to take advantage of or leverage extra time and capacity of these current employees to create additional revenue and profits for the business.?
  3. Current Physical Location. Your existing business has a location and you want to utilise some portion of this real estate asset through another franchise business operation as a way of producing higher results.

Other examples of this dynamic include:

  • Moving companies that have acquired real estate franchises in order to leverage existing customers by selling them relocation housing services.?
  • Gas stations and convenience markets that have added reduced-menu fast-food outlets into their existing location.?
  • Furniture retail outlets that have added floor or window covering franchise operations to sell additional products and services to existing furniture customers.?
  • Damage repair and restoration companies that have added franchises providing mold removal, vent and dryer cleaning and other services to their offerings to customers.?
  • Food franchise companies that have created co-branding opportunities to put multiple brands into a common location to leverage existing staff and physical sites.
  • The advantages of this type of expansion are numerous for both sides of the equation. As an existing entrepreneur, you get another profit centre with far less risk and work than what would normally be involved in starting a new business. Often, the franchise companies already have a strong brand presence in the market and a turnkey operation set up for new franchisees. The franchisor gets a proven successful operator with a solid existing business to support the new franchise business while it’s getting off the ground.

This strategy is often a true win-win scenario for both parties and a wonderful example of the adaptive nature of the entrepreneurial spirit!

Jeff Elgin
About the Author
Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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