When Should You Open a Second Franchise Location?

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Franchisees frequently ask us, “When should I open my second location?” This question is a tough one to answer and has a different answer for every franchisee. However, there is a relatively short checklist that can be used as a framework for deciding when to start looking into purchasing and starting up a second franchise location. Of course, every franchisee should look at their personal position and decide whether or not another location is feasible at the present time. For some franchisee’s, a second location is never the right decision. On the other hand, what we’ve often found is that most franchisees that successfully run their first location for 5 or more years can typically handle adding another location and furthering their company’s growth.

So, you’ve successfully run your first location and now you’re trying to decide whether adding a second location is right for you or not. Use this quick checklist as a framework to decide whether or not a second location might be in your near future.

check     You’ve set & met (or exceeded) your 1, 3, and 5 year goals.

Good business owners set 1, 3, 5, and even 10 year financial goals for their businesses to create a benchmark to work towards. Setting goals is the first step, followed by tracking them and comparing your actual financial position to your forecasted financial position when you reach these milestones. One of the main ways that business owners become out-of-touch with their financials is from not comparing actual numbers to projected numbers. If you can not only create a healthy goal for yourself and where you want your company to be in 5 years, but also reach & exceed this goal, you are on the right track to start considering a second location. This means that you are able to accurately forecast your future finances and could benefit from the profits of another location.

check     You’ve developed a good relationship with the franchise.

Financials aren’t the only important thing when deciding whether or not you should consider adding a second location. Your relationship with the Franchise is important because a healthy relationship can help give you the resources to easily and smoothly find/open a second store. If you do not have a good relationship with the Franchise, looking into another concept may be a good next step if you think you definitely want a new location.

Your franchisor can help you with support and advice and can point you in the right direction when considering a second location. They can also help connect you with other franchisees who have been in your shoes before. If you have a good relationship with your franchise, you are in a solid place to start looking into a second location.

check     Your personal finances are in order.

One of the last things you should do is look to open a second location because you’re currently in a tough spot financially. Taking on more debt and stringing yourself out even more with a second location is not a good way to solve financial troubles and can lead to further hardships. When considering a second location, make sure you are in a comfortable financial position and that you have funds on reserve in case you need them. This is key, especially when purchasing a location from another franchisee. You never know what you’re going to get with a franchise purchase until the purchase is final and you’re trying to run a new store. You may have unforeseen renovations, updates, replacements, new hires, etc. If you are in a good personal financial position and have some cash on reserve for unforeseen expenses, you are on the right track to opening a second location.

check     You’ve built a hardworking and trustworthy team.

One of the main concerns we here from franchisees is that they are worried about how their first location will run when they start up a second one. One-store franchisees are frequently in the store and running the day-to-day operations. When a second store is thrown into the mix, it can be difficult for the first store to continue it’s strong performance when the owner is now splitting time between two locations. Additionally, in the beginning phases of the second location, the franchisee will probably have to spend more time at the new location to get it under way.

The good news is that most franchisees realize that the team at the first location, especially if they have been there for 3+ years, will be able to operate at the same level of strength when the franchisee is splitting time between locations.

If you feel that you have built a great team of employees and managers, your finances are in order, you have a good relationship with your franchise, and you are meeting your financial goals, you are most likely ready to start looking for a second location!

Harbour Capital Corporation helps one-store franchisees embark on the journey of opening a new store every day. We love to see the franchisees we work with grow their businesses and are here to help with the finance needs associated with this success. We can also put you in touch with franchisees in your concept who have worked with us before to ensure that you are working with a trusted lender.

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