I was introduced to a company recently that has grown largely through company owned and franchise store locations. I don’t know much about them. I do know that they have limited retail presence, but in the retailers in which they sell, they have good sell through. However, they only sell in retail in the geographic areas in which they have franchise locations. They don’t do any mass marketing, and for that matter, they may not do any marketing at all. In essence, their franchise locations have built their brand and their retail sales.
The company wants to expand primarily through retailers in new geographic markets and do so more quickly than it has done in the past. On the plus side, it has a distinct brand, but only in the geographic markets in which it has good franchise and retail coverage. It has great products. On the minus side, it is in a crowded and very competitive category and it does not have substantial capital to invest in aggressive growth.
What’s the best way for this company to grow at the pace that it wants? This got me thinking about the strategy of using franchise locations to do the marketing for retail.
As this company operates in a very competitive and crowded category and may have limited resources to market its brand in new markets, my suggestion is to avoid large metropolitan markets. Instead, expand into smaller or mid-size markets. There may be less competition, although I don’t know that for sure because that is an assumption. One would have to do some market research into each market to make that determination. Also, the visibility from the franchise locations may be more concentrated and thus, more impactful over time in creating brand recognition. I am going for the bigger-fish-in-a-smaller-pond analogy, here.
Once there is at least one franchise location, move into local retailers with the primary marketing engine being the franchise location and its visibility. Since this company operates in a competitive category, sampling may be required at retail, but why not use the franchise location as a sampling vehicle? Use coupons or call to actions on the packaging to drive consumers to the franchise location to try samples, and, advertise the availability of the products in stores from the franchise location. I know, the obvious red flag there is that the franchise operator won’t want to advertise the product that can be purchased elsewhere. But I am just brainstorming here, not trying to solve any problems.
I don’t know of any good case studies about this strategy of using franchise locations as the primary marketing vehicle for retail store sales. Sure, we all know of Starbucks, but this company was already a household brand before it drove into retail.
I think the problem with this strategy is that it may still force a slow-growth plan, since the weakness is in the ability to find available franchisees. If there is marketing behind a brand, I am guessing it is easier to find franchise owners. However, I have never done anything in franchising and don’t know that market at all, I am just making an assumption.
Disclosure: I have not received any compensation for writing this post. I have no material connection to brands, products or services that I have mentioned. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255.