Expressed opinions Entrepreneur Contributors are their own.
The Covid-19 epidemic proved the wisdom of the proverb, “Don’t put all your eggs in one basket.” Businesses that have been steadily improving or floating over the past few years understand the power of this mentality, because they already had multiple revenue streams, or they moved quickly to adapt to the changing landscape.
We often hear about the importance of diversifying a financial portfolio, but this is also true of a franchise portfolio. Forward-thinking, multi-unit franchise operators should focus on diversifying their business to minimize risk, if they are to cope with the ongoing effects of the global epidemic or have only a low performing unit or brand.
Creating a franchise empire of non-competing brands helps a franchisee build a strong aggregate in one location, allowing them to stay in their own city as they expand. Also, franchisees can gain their knowledge about the local market for new ideas.
Investing in different franchise segments may seem daunting, but there are several strategies to help franchisees and investors determine which new brands are the best additions to expand their franchise holdings.
Financial Disclosure: Dan Rowe is the CEO of Fransmart, a partnership with franchising group Brooklyn Dumpling Shop, Rise, Taffer’s Tavern, Pemore, Ike’s Love & Sandwich and Jars.
Look for complementary brands
Those who want to expand the restaurant franchise with other food-related brands should look for a non-competitive, but complementary, concept. For example, if a franchisee already owns an Ike profit and a sandwich shop, adding an all-dessert restaurant jar to celebrity chef Fabio Viviano would be a strategic addition. If they are in the same position, it is normal for customers to be attracted to something sweet after Ike’s meal, especially if it is right next to it.
The complementary nature of the two brands also gives the franchisees the ability to cross-promote. In this situation, the customer database of their Ike franchise would be the ideal place for direct marketing when announcing a new Jars location in the city. Since their customers already like to eat at their local Ike, they will be receptive to a new dessert idea from the same owner. Having an existing, loyal customer base also makes it easier to introduce a second or third complementary concept than the first brand.
Find a new art
The past few years have been challenging for many restaurant franchises, as the industry suffered the most during the epidemic. To understand that restaurants have some limitations and are more sensitive to public health restrictions (now and in the future), franchisees should also consider looking outside the food industry when adding them to their franchise portfolio.
With labor shortages and supply chain challenges still affecting restaurants, many restaurant franchises are looking at alternatives like PayMore, America’s fastest growing new and used electronics and gaming franchise. The concept has a low startup cost and existing franchises are satisfied with consistent profits.
Chris Phillips is an experienced franchisee who owns several Elevation Burger stores in Philadelphia. He wanted to expand his franchise portfolio and initially planned to add another height position, until he found PayMore.
“It simply came to our notice then. Everyone, even young children, has electronics, and the retail market is huge, “says Phillips.” I can open two or two and a half PayMore locations at the same cost of opening a restaurant, with much less headaches. Hours are better, You don’t have to deal with supply chain issues. “
While some restaurant owners may never consider finding a brand outside of food service, it is a strong protection to consider against issues that negatively affect this particular industry.
Find operational adjustments
At first glance, there may be some similarities between the concept of an Asian dumpling restaurant like Brooklyn Dumpling Shop and a Southern chicken like Rise, but on closer inspection their similarities are perfectly perfect. Both ideas were at the forefront of the restaurant technology revolution. They work with both online and kiosk orders, use food lockers for take-out orders, and use useful technology in the backyard. If a Rise franchisee decides to add a Brooklyn Dumpling Shop to their portfolio – or vice versa – they will easily understand and adapt to the systems and operations of others. Similarly, if franchisees add it to their portfolio, their technology-savvy customers will probably patronize other concepts. Looking for a smart strategy for such operational synergy for a franchise when choosing a new brand.
Expand into different sections
For franchisees who love the food industry and want to diversify, one option is to choose a different category. For example, many franchises, including Quick Service Restaurants (QSRs), should consider adding a full-service restaurant to their portfolio. Launched by Taffers Tavern, recently Bar rescue Star Jon Taffer is a state-of-the-art full-service food store that uses technology and a robotic kitchen to greatly reduce build-out costs and ticket time, making it compatible with a QSR franchise.
The epidemic showed how absolutely unbelievably fast it could turn into a new reality. While no one can predict when or what the next crisis will be, smart entrepreneurs are learning from what has just happened and building structured businesses to better deal with future challenges. Diversifying a franchise portfolio is a difficult and easy way for entrepreneurs to work now to hedge their bets in the future.
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