How to Create Success in a Small Market as a Franchisee
Feb 6, 2018
By: John Gordon, Director of Real Estate
There’s no denying the risk of starting a business in a small market, and a franchise is no exception. A smaller local population means that you might get only one chance to impress guests and turn them into regulars, and there’s not much room for error.
But don’t let the high stakes spook you. With careful planning, a location within a small market can be a big win for brand enthusiasts looking to bring a favorite spot to their hometowns or multi-unit franchisees looking to take the next step in their plans for growth.
The variables that a franchisee has to examine before launching a new location are the same regardless of market size. But, in a small market, these factors should be under a microscope. Here’s the due diligence I recommend to any franchisee setting out in a small market:
Site is (Still) Everything
The franchisor should be doing the necessary demographic and psychographic research to determine whether your small market has the brand awareness and consumer profile to sustain a successful franchise. However, once that’s squared away, your site selection can still make or break your new franchise.
When you’re searching for a site, stay analytical and look for the classic indicators of a strong franchise location. Your site should:
- Be highly visible
- Accessible from all major arteries including designated cross access
- Convenient. That means easy parking and a drive-thru or 2
- Have a mix of 24/7 traffic; residential and commercial traffic during key dart parts is essential
However, you can also keep your eyes open for hidden real estate gems that you wouldn’t find in a larger market: Empty parking lots or vacant chunks of large properties that were divided. In a small market, there will be less competition for these prime drive-thru spots. Remember, investing in a quick-service restaurant with a drive-thru means less risk for you, so get the site right the first time.
In a small market, you don’t have much wiggle room with site selection. Everything needs to be close to perfect. However, you do have some flexibility when it comes to defining that perfect site.
For example, I usually advise that franchisees choose a location with 30,000 people living and working within a seven-minute drive. In a small market, that radius can increase to a 15-minute drive, and effective population (the number of people who fit one of your guest profiles) might prove a better predictor of success than overall population. Similarly, don’t worry too much about the ratio of residential traffic to commercial traffic, as long as you’re seeing 20,000 or more cars per day in traffic volume.
If You Build It, They Will Come
When you offer a new food option in a small market, be prepared to be a destination immediately.
Also, be prepared for those skyrocketing sales to drop off after the first few weeks.
The service you provide during that initial rush will determine the success of your new franchise into the future. Be over-prepared for your opening so that you don’t drive off any guests with slow service.
Your job during the first few weeks of operation is to win over curious guests and keep them coming back on a weekly basis. Providing one great experience is not enough – you want to immediately establish your brand’s value and show guests why it’s worth it to build your brand into their lifestyle.
When sales start to decline after those first few weeks, know it’s not your fault. If you maintain your focus on building a base of loyal guests, you don’t have anything to worry about. While franchisees in larger markets have to fight to get noticed, you have to fight to be valued. Be ready to make a lasting impression when a guest walks through the door.
Play It Smart
Sharp instincts and sound strategy are not any less important when you’re in a small market. Keep these extra tips in mind as you plan:
- Don’t rush into multi-unit ownership: Wait for your success with a single unit in a small market to indicate that you – and the market – are ready for growth.
- Know your product and its purpose: Don’t shoehorn your brand into places where it won’t flourish. For example, Smoothie King hasn’t targeted the clusters of drive-thru restaurants near highway off-ramps because guests pulling over for a burger aren’t likely to visit.
- Consider your surroundings: How close are you to the nearest big city? Proximity to a major market makes a huge difference in brand awareness.
- Don’t rely too much on forecasting models: Your corporate arm likely uses analytical software to evaluate potential sites, but don’t underestimate the power of getting out there and talking to people in your target, small market. Speaking with brokers, consumers and business owners will build your understanding of the market and fill in the gaps left by any forecasting tools.
- Be smart about the competition: Don’t let the success of a competitor in a given market convince you that your brand will achieve the same results. Stay committed to doing your research before investing.
Opening a franchise in a small market comes with challenges, but you can see a huge payoff if you take the time to get it right. With strategic site selection and a strong game plan, success in a small market is well within reach.