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7 Things to Consider before Opening your Second Franchise Location

Success with small business or a franchising model can be intoxicating. The accomplishment of being in the black undoubtedly took a lot of hard work. So, opening a second location of an already working business model should be easier, right? The answer is: maybe.

Before you start down the road of opening a second franchise location, be sure to consider these key components.

First and Foremost – Don’t Rush It

  • Be sure you have had enough time operating your first location and have sufficiently learned how to operate and manage the concept.
  • Work/Life balance is important. Make sure you have enough time to devote to opening a second location. Now is a good time to consider an Operating Partner that can oversee two General Managers.

Set Your Foundation – Operational Systems & Standards

  • Understand the brand’s Operational Systems & Standards and how to consistently apply those concepts from your experience at your first location. Set a plan on how you will duplicate their application in your second location to create a successful operational base and provide protection for your revenue and profit.
  • Understand the dynamics of your Profit & Loss statement, how it works to advance revenues, control costs, and drive profit.
  • Be confident that you can reproduce the execution of these Systems & Standards for your second location.

Formulate a Plan to Duplicate and Apply Your Learnings

  • Understand the human resource requirements in both staffing needs and cultural strengths; set a plan on reproduce these dynamics for your second location.
  • Determine if you can share human resources from your first location with your second location.

Know your Customer

  • Study your customer. Understand exactly what makes the concept memorable to them and what motivates them to return for more.
  • During site selection for your second location, compare the demographics from your successful first location to those of your potential sites. Distance from your first location is also an important factor.

Financial Needs and Funding

  • Set a financial strategy for your second location. Determine the fiscal needs and your ability to fund this new location, as well as where you plan to source the funds.
  • Determine the complete budgetary needs for your second location. This includes your development costs like architectural fees, permitting and construction, as well as at least 3-months of operating capital.
  • Evaluate your relationship with your initial funder and understand your ability to get funding from other sources. This should be an ongoing dialogue with your funder.

Development Plan and Construction

  • Understand your development plan and contractual commitments with your Franchisor. What is your commitment to timing and numbers of sites you are pledged to open.
  • Reflect on the design, permitting, and construction of your first location. Take note of any costly change orders, special exceptions, or errors in the plans that cost you either time or money.
  • Review your architectural plans and construction bids from your first location. Determine if there are any cost savings to be had. For example, were there pieces of equipment that were never used?
  • Revisit your relationship with the architect and the general contractor that helped you design and construct your first location. Determine if they are a good fit for your second location.

Marketing Plan & Resources

  • Determine the most successful marketing plans at your first location. Understand what about those plans resonated with your Customer base.
  • Have a revenue optimization plan from day one. Your past experience will dictate what works over what doesn’t.
  • Talk to the Franchisor. Make sure you and the Franchisor are in sync with the level of support you’ll want and need. Some Franchisors abbreviate training and other aspects of new store openings for multi-unit operators.
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