At some point, if your local or regional customers love your product or service, the question "Should we expand nationally?" may arise, as can the follow up, "And if so, how?"
Of course, many businesses don't expand nationally. Some business owners prefer that their regional businesses stay put. But if you do decide to expand nationally, there are three common paths to take, each with their own set of merits and downsides.
1. Expand Nationally by Franchising
This is a popular way to expand nationally. In fact, according to the Franchise Business Economic Outlook for 2017 created by IHS Markit Economics for the International Franchise Association, there will be 744,437 franchise establishments in the United States by the end of the year. One reason it's such a popular method of growth is because the people who pay you that franchise and royalty fee are sharing in the risk (and rewards) of growing your business.
That said, some extremely successful businesses don't franchise. For instance, Starbucks, as a general rule, doesn't franchise. Nor does Barnes & Noble, Whole Foods Market and a whole slew of other successful companies.
Making the decision to expand nationally through franchising generally comes down to whether it makes sense for the business.“When I started The Flame Broiler, I was unfamiliar with the concept of a franchise," says Young Lee, the owner of The Flame Broiler, a restaurant that specializes in rice bowls. (Lee opened his first restaurant in 1995 in Orange County, California.)
But he ended up franchising in 1999 after some businessmen, excited about his restaurant concept, approached him to discuss business expansion. The company now has over 190 locations in California, Nevada, Arizona, Oklahoma and Florida. Before the year is up, they will have more than 200 locations, with restaurants also in North Carolina and Idaho.
In terms of the growth he has seen over the years, he says that having franchisees buy into his franchise has meant that scaling the business hasn't been as difficult as you might think.
—Ryan Farley, co-founder, LawnStarter
On the other side of the equation (and country) is Graeter's, a chain of ice cream parlors headquartered in Cincinnati, Ohio. It's a company that started in 1870, and the ice cream is legendary, even iconic, in southwestern Ohio and Northern Kentucky. (There are at least 20 locations in that area alone.) There are also parlors in a handful of other states, like Indiana, Illinois and Pennsylvania.
The chain tried their hand at franchising. For years, there had been a dozen franchises, never operating too far from the Cincinnati headquarters.
"The decision to try franchising was made by the third generation, primarily by my father. At the time, we were a small Cincinnati-only brand," says Richard Graeter, CEO of Graeter's Ice Cream and the fourth-generation in the family to run the business. "My father couldn't imagine us ever expanding like we have and felt that letting a few other carefully selected people make Graeter's in other cities was a way to make sure that the brand survived into the future and beyond Cincinnati."
But several years ago, Graeter says, the corporate headquarters bought all the franchises back except for one.
“We ultimately concluded that letting franchisees manufacture as well as sell our ice cream was too much of a risk, since the core of the Graeter's brand is the quality of our product," Graeter says.
That's why you aren't likely to see a Graeter's in Phoenix, Los Angeles or Toronto any time soon. For now, its ice cream parlors remain a regional presence.
2. Partial Expansion
All businesses do this to an extent when they put up a website—it lets anyone around the world with internet access reach them.
But if you have, say, a local flower shop or heating and cooling repair company, you probably aren't doing international orders. For some local or even regional businesses, it may not be practical to go national. You might even argue that what makes your business so special is that you can't find it everywhere.
Still, maybe there is an element of your business that could go national.
That's what Graeter's decided to do. In 2011, the company started selling their ice cream nationally, in 4,000 supermarkets across the country.
But it didn't just happen because supermarket executives were familiar with Graeter's and enthusiastic about the product (Kroger supermarkets, which sells Graeter's, is also headquartered in Cincinnati). Graeter says that in order to expand nationally, the company had to invest in their infrastructure. They opened a new manufacturing plant and substantially expanded their ability to store their finished product.
“We modernized part of our manufacturing and product handling processes but retained our artisanal, small-batch French Pot freezer process which is critical to producing Graeter's unique quality," Graeter says. “Also, by forecasting demand well in advance, we are now able to produce ice cream evenly throughout the year, which has enabled us to expand to new markets, including other grocery stores."
This tactic may not work for all businesses, of course. But even the local flower shop or heating and cooling repair company can invest in another delivery or service van to help expand its local or regional footprint.
3. The Slow Roll Out
Whether you're franchising or a regional company that's growing, you don't have to expand nationally overnight. Take LawnStarter for instance. The lawn care service company started in the Washington, D.C., area during the summer of 2013. A year later, they moved the company to Austin, Texas and began servicing that city as well.
Now LawnStarter is in more than 30 cities. While the company is certainly not moving at a snail's pace, they are trying to be measured in their growth, according to Ryan Farley, a co-founder and the company's CEO. It's a strategy that he would recommend to other businesses interested in expanding nationally.
“When selecting new markets, make sure they aren't anomalies. Understand the differences," he says.
Farley says that he and his co-founder Steve Corcoran didn't start off thinking that way.
“When we expanded into Baton Rouge, we learned that many people had their lawns destroyed by flooding," he says. "Because of this, customers wanted lawn restoration services that we hadn't planned to offer. We didn't learn this until a couple months in, and while this was not devastating, it was a setback."
In any case, Farley says that the company is progressing slowly on purpose. "Initially, we chose a diverse set of markets to get a read on what the differences were. Now, we look at our demographic profiles that are the most valuable for us, and target metro areas that match those," he says.
Eventually, he and Corcoran want to service every major city and minor town throughout the United States. "But that'll take time," Farley says.
A slow, or relatively slow, roll out can also allow you to be more shrewd about your marketing.
"The biggest challenge has been building brand awareness," Lee says. "Also, convincing the people in these new markets that fast food can be tasty and healthful."
That, Lee says, has been the biggest challenge his restaurant chain has faced as it expands nationally—building brand awareness. He says he has done this mostly through advertising in Orange County, where his headquarters is, but also in new markets.
“The key recipe to building this awareness in our local community has been through utilizing billboards, bus wraps, etcetera and through partnerships with organizations like the Anaheim Angels baseball team," Lee says.
However you decide to expand nationally, “make sure you nail your expansion plan," Farley advises. “You need a playbook that can be repeated every single time."
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