Considering Running Franchisees Alongside Your Existing Corporate Stores? Key Factors to Ensure Success
- Jun 5
- 4 min read
Running franchisees alongside existing corporate stores can be an effective strategy for expanding your brand and business. However, achieving success requires strategic planning and careful management. I have worked with clients who struggled to effectively manage their franchise operations and corporate locations due to insufficient resource allocation and budget planning. As a result, they were unable to address the span of control challenges that arise when overseeing both corporate stores and franchisee networks.
Here’s what to consider when running a parallel strategy:
Resource Allocation
Managing both franchise and corporate stores requires smart resource allocation. You'll need a balanced approach to staffing, support, and resources to ensure both business models function smoothly.
If you have made the call "I want to franchise my business," you will need to backfill your own role. Yes, you can try to manage franchise development in the margins, but frankly, I have never seen franchise development work successfully or rapidly if you are bombarded by corporate store problems.
What's more, once you have your first cohort of franchisees, your immediate requirements in the franchise trenches will increase. These are the "prototype-testers" of your franchise system. You will need to be there for them to ensure they develop into the brand ambassadors you want them to be.
Ensure you have the capability to manage and support the growth of both store types without overstretching your capacity.
Brand Consistency
Brand consistency is essential when operating both franchisee and corporate locations. Your franchisees need to follow the same operational standards, and the customer experience must be uniform across all locations.
I have seen clients who struggle to manage the customer service experience across a handful of corporate stores even without franchisees to contend with.
You need a Service Excellence Operating System, which enshrines your customer service mandatories and the requirements across all brand touchpoints, from customer dialogue, call scripts to menus and direct interaction.
Maintaining consistency ensures your brand remains strong, recognisable and capable of repeat business.
Support Structure for Franchisees
Franchisees require ongoing training, support, and guidance to manage their businesses successfully.
Allocating an operations manager to visit franchisees occasionally when they are not run off their feet in corporate units is not the best approach. Franchisees expect guidance from operators much more qualified and experienced than they are. They pay royalties for access to the system, and that system needs to be structured and consistently applied at franchise locations.
It’s essential to have a structured support system in place for franchisees, providing them with the necessary tools to excel.
What does that even look like? Start with who is going to be the interface with franchisees. Who is best paced to guide them at the start of their journey, in the middle and then towards renewal. They are most likely different people with different skills sets as the franchisee develops their own competencies.
This is a major responsibility for franchisors, and ensuring your support framework is robust is key to long-term success.
Legal Compliance
Franchisors must comply with legal regulations, especially when managing both corporate stores and franchise locations. This includes ensuring all franchise documentation, disclosures, and agreements and specific purpose funds are compliant with local laws. At Franchising Made Easy®, we spend a lot of time helping clients navigate compliance and preparation of disclosure requirements. We have a panel of select franchise and commercial lawyers who do the heavy lifting of the legal documentation. Together we apply the law and commercial nous to make sure you swim between the flags of legal compliance.
Financial Considerations
Operating both franchise and corporate stores will require significant financial investment. You'll need funding to support the initial development of franchise locations and ongoing operational costs.
Preparing what we call a "Benefits and Budget Model" is a good place to start. Certainly, plot the revenues over time you will derive from initial franchise fees, royalties and other value chain benefits such as rebates and specific purpose fund contributions. But model the investment you need to consider for labour, marketing, legal services and technology.
Balancing the financial needs of both strategies is crucial to avoid draining your resources and to ensure both areas of the business remain profitable.
Benchmarking Performance
Running a combination of corporate and franchise stores offers the opportunity to benchmark performance. By comparing corporate store performance with that of franchisees, you can identify areas of improvement and ensure that both corporate and franchised locations uphold brand standards. Competitive comparison helps to drive continuous improvement, which will elevate the overall performance of your network.
Similarly, we prepare a terminal value economic model which compare the growth of enterprise value over time so that you can balance your corporate versus franchised network rollout.
Barry's Final Thoughts
Expanding your business with a dual strategy of franchisees and corporate stores offers significant growth potential, but it requires careful planning and execution, not to mention cash reserves to fund the management of both sides of the business.
I experienced this early in my career managing Master Franchises side by side with corporate distribution channels. Both have pros and cons and ultimately, you have to choose the model that provides the greatest return for shareholders (probably you, the Founder!) and balance of sanity.
Both models can thrive but they need tailored management approaches.
If you’d like to learn more about how to effectively manage a parallel franchise and corporate store strategy, feel free to reach out. We’re always here to help.
Speak With a Franchise System Architect
If you are exploring franchising and want to determine whether your business may be ready for franchising, understanding the development process is an important first step.
At Franchising Made Easy®, we help founders design franchise systems that are structurally integrated and capable of sustainable growth.
If you would like to explore how franchising could work for your business, consider speaking with an experienced Franchise System Architect.
