March 16, 2016
At the end of 2015, we had 54 franchises sold. Of the 54 sold, we had 14 open and operational as we brought in the New Year.
Getting 54 sold was no small feat and definitely something to be excited about, but the real accomplishment is having 14 operational. For a young franchise, it would have been easy to focus on increasing number of units sold. Instead, we narrowed in and focused our efforts on getting as many units operational as possible.
Based on our last year’s growth models, we projected opening 25 new locations in 2016. This included 12 of the already sold units as well as 13 new units that would be purchased and opened within the year span.
Update: As of May 2016, we have sold 64 units.
Many of the 54 locations sold were part of a multi-unit purchase. Those additional locations will not open for several years.
Despite the delay in open date, we pursued multi-unit deals because that will be more beneficial long-term for the franchise as a whole. The majority of franchisors I worked with over the years echoed the same intention. Selling multi-units to one franchisee has advantageous because you work directly with one franchisee to expand several units. Additionally, as a multi-unit franchisee grew their brand equity, they created regional capital.
There were several contributing factors that enabled us to multiple units. First and foremost, the entire cost to open a PLAYLive was dramatically less than many franchises. The total anticipated cost was approximately $100,000-$150,000. This is on the lower end of what you can expect to pay for a franchise that requires a brick and mortar location. Many brick and mortar franchises require initial investments from $300,000 to over million dollars. For that price, you could have opened up several PLAYLive franchise units.
The second factor that attributed to our appeal was the simple build out. Essentially the desired location was a box. Our franchisees didn’t need to build out extensive remodels or find locations with comprehensive specifications. While this didn’t mean all of our franchisees had an easy time finding a location in completive real estate markets, it did make the process simpler in comparison.
Like the majority of franchisors, we offered a discount on franchisee fees when you purchase multi-units.
While we were excited to grow the franchise, we were not willing to jeopardize the system by working with prospective franchisees that were not a good fit. We started formulating who is our ideal franchise candidate. This included determining financial stability as well as determining if individuals were a fit for the model.
Every good franchisor will have different criteria to screen applicants. I learned that the criteria changes as your franchise becomes more seasoned. For example, one we discovered is that we want to ensure that franchisees have not only enough funds to start the franchise but also to live on for up to a year. We had some franchisees in tight real estate markets take up to twelve months to become operational. If you have no other source of review, you will need to be able to support yourself until the store can open.
After franchisees have executed the franchise agreement, we revised the process and looked for ways to make it easier and more streamlined for new franchisees to open. One thing I learned through the process was that even the best intentions and well-laid plans could be delayed by unforeseen problems. Our biggest struggle came from navigating competitive real estate markets. PLAYLive needed commercial locations that were 21st century ready. This included many modern amenities such as Wi-Fi. Surprisingly, that was more difficult than expected.
If you are looking to move forward with franchising your business, then contact me today. As both a seasoned franchise lawyer and part franchise owner, I can help you build a solid legal foundation to grow a successful franchise.
Additionally, if you own a franchise and are looking to expand to other regions it is most likely time to revise your FDD. As we have been expanding PLAYLive into different states, I have been overseeing the adjustments, the agreements, and the FDD to ensure it reflects the laws in each state.