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Budgeting is Crucial in a Franchise Expansion

(for Spanish version click here)

Many franchisors have a budget but they do not have a particular Expansion budget. Why?. There are many reasons, but we can aproach the problem by considering two franchisor ´s groups:

1.- For those who start franchising, their start decision to franchise is made based upon the fact that the business is franchisable, without any consideration being given to the following topic:

How much money should I spend to achieve the franchisee number that I want or that is my breakheaven point?.

Amazingly they consider more important other topics not related with their growth, forgeting completely that the key of this business is to achieve the most franchisees you can as soon as possible. In the early stages, expenditures are high and revenues low.

Frequently they think that there are a lot of people already interested in being their franchisees and they asume that all those people are going to become franchisees. Absolutely not. If they are lucky, only five % of their leads are going to be closed. So they need more money to get more leads. This is the principle cause of many start-up disasters.

2.- For those who already are in the market, they have a budget, but not an «Expansion budget». Usually they assume that it is enough to go to some Trade Fairs and have a sales person. That ´s the budget!!!!

There are an important number of topics which are necessary in considering a successful franchise Expansion.

How many leads do I need?

Which is my close ratio?

What channels to use?

How many people need my expansion department?

Where should I put the money in leads generation? Internet, review, newspaper, trade fair…where?

Budgeting is Crucial in a Franchise Expansion,…do not forget that. Believe me or not it is dangerous

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