Franchise Development: What It Is & What It Tells You About A Franchise
We’ve all heard of franchises, but many people don’t know what goes on behind the scenes of building a booming business that spans dozens or even hundreds of territories. Strategic franchise development is essential for building and growing a profitable franchise, and there are many moving parts to ensure its success.
Let’s cover the basics of franchise development and how its processes can often make or break your business.
What is franchise development?
It combines sales, marketing, legal and real estate. It is the strategic process from the beginning stages (concept) through the expansion phase and beyond.
So, what’s involved in the development process, and who’s responsible for ensuring a franchise hits the ground running and remains sustainable?
First and foremost, you must create a franchise business plan. This blueprint will include a profile of the target buyer, franchise fee, royalty fee, advertising fund model, and more. Another critical step to building a successful franchise is mapping out a profitable financial model for both franchisor and franchisee.
The development process also involves the management of legal documentation and the state registration process. A Franchise Disclosure Document must be provided to and updated annually with the Federal Trade Commission (FTC) in order to sell franchises in the U.S.
A franchise system must have a fully defined and documented operations system in the operations manual and legal documentation. This manual will be a critical sales and training tool for the franchisee.
What does a franchise developer do?
The role of franchise developers is to streamline different areas of building up the franchise, including working with digital marketing companies, branding agencies, business consultants, and franchise and trademark attorneys. Because the FTC closely regulates the process, a franchise developer is the point person to ensure all regulations and requirements are met on both the federal and state levels.
Like a general contractor builds houses, franchise developers manage the entire development process and work closely with business owners who envision taking their franchise nationwide. Some of the essential tasks developers tackle are:
- Defining the franchise relationship and structure
- Researching similar franchise businesses in the marketplace
- Coordinating documentation and working with a legal team to ensure everything is aligned.
More specifically, a Franchise Area Developer is responsible for the growth and expansion of the franchise to multiple locations and is typically called a multi-unit developer.
What is the franchise development process?
As the franchise developer spearheads the “concept to creation” process for a new business, it’s essential to understand their detailed approach. The process works in phases, including:
- Establishing a profitable business model
- Ensuring legal documentation is completed
- Securing real estate & meeting site requirements
- Construction & opening of the unit
- Hiring management staff to run the franchises
- Selling your franchise to expand
- Providing support to your franchisees
This can seem like a pretty hefty task list for one person to handle, which is why many franchisors hire a team of developers to ensure the process runs smoothly. Typically, once a franchise developer or team starts working with an owner, they remain on board as active members of the franchise.
Mark Murphy, our Director of Franchise Sales/Development, handles all things dealing with the development of our franchise at Launch Entertainment.
Are franchise developers in-house or outsourced?
While Launch is lucky enough to have someone on our leadership team, smaller companies typically don’t have the budget to hire an in-house higher level professional to operate the business.
Tasks like bookkeeping, accounting, payroll, and other back-end support can be outsourced to one company that provides cohesive services. Outsourcing technology is also standard in franchising until budgets allow for in-house help. Of course, outsourcing gives new business owners access to a larger talent pool and the ability to free up more time for themselves by delegating a lot of the operational responsibility.
At least in the beginning stages of developing a franchise, real estate development and marketing are two areas where outsourcing makes sense. Eventually, if the franchise is doing well, these can turn into in-house positions.
Launch, which opened in 2012, started franchising in 2013. We now have over 25 locations with an ambitious growth plan to continue expanding across the U.S. Murphy is in a key role to oversee that expansion.
What are signs of a strong franchise?
When researching a franchise, there are many things to consider before investing and committing to a team. Here are a few key factors to help determine whether a franchise developer is strong enough to succeed.
Financial success. You can look at previous FDDs to determine whether a business has shown consistent growth. Explore the franchise’s past financials by exploring Item 19 in the FDD.
High-demand market. Look to see if your potential franchise is popular and in demand. Is this service something the market needs and is currently looking for? Launch is a service-based business that specializes in providing indoor fun for children and adults alike.
Brand recognition. Being able to recognize a brand means there’s consumer loyalty, therefore increasing the demand for more locations. Simply put, more consumer loyalty can increase the franchise’s value and put you on top as an owner. Launch has been building our reputation for 10 years, and in fact can boast some of the lowest insurance rates in the business thanks to our safety record.
Sustainability. Since the onset of the pandemic, more people are looking for ways to protect the environment and invest in their future. Sustainable businesses are not only a part of a growing trend but aim to minimize their carbon footprint and negative environmental impact.
Replicable business. Ask yourself, does this franchise offer multi-unit options? If so, your chances of exponential growth are much higher than a single unit franchise. Look at how many units a franchisee typically owns and runs efficiently. This may be a good sign that the business is able to be replicated and profitable.
Consider franchising with Launch
A deeper understanding of the franchise development process and the developer’s role can help you differentiate a good investment from a poor one. At Launch, we’re proud of Murphy and our entire franchise support team.
We are a standout franchise in the family entertainment business, having evolved from our start as a trampoline park into a wildly popular entertainment center. Launch offers trampoline courts as well as a battle pit, laser tag, dodgeball and other thrilling activities. In addition, franchise owners can diversify their income streams by hosting birthday parties and other social events, selling merchandise, operating our in-house Krave pizza restaurant and offering locker rentals. By offering memorable experiences, you can gain repeat business.
Contact us to learn more about jumping into a Launch franchise opportunity of your own.