As you start to investigate franchise alternatives, one of the important criteria to consider is a choice between “emerging” and “established” franchise brands. Both have attributes that appeal to different types of franchise investors. Let’s take a few minutes to consider the differences between brands on this maturity spectrum.
Let’s start with “emerging” brands. In its development, every franchise company goes through an emerging phase. During this development stage, the brand is laying its foundation by operating a single or potentially a handful of corporate owned or friends & family locations. These foundational units serve as the testing ground for the concept and enable the franchise leadership team to build “Brand Model 1.0”. In this stage of development, the franchise model is more fluid. The marketing plan that is being tested, the target customer base is continuing to be refined and the day to day operations are always being improved and streamlined. In short, the “brand” is a work in progress.
Let’s be frank. At this point, there is potentially a great idea and terrific addressable market. But the franchise company is light on proof of concept. So, why do franchise investors consider “emerging” brands? It’s simple – the early bird gets the worm.
With most brands, there are certain areas/regions/territories that simply have more target customers with better demographics in a more tightly defined region. If you can be an early adopter to an emerging brand, you will be able to invest in locations that have the opportunity for spectacular performance.
During this “emerging” brand phase, there can be significant energy and excitement about an opportunity that could have significant market opportunity and upside potential. However, it is important to balance this potential with the reality that there is also heightened risk because the track record is more limited.
At the other end of the “maturity” scale are “established” brands. These are brands that have a longer track record and have developed to the point where you have already seen their logo, heard their marketing and maybe even been a customer of the business.
As you well know, many people feel more confident and comfortable with brands that already have name recognition. If we start talking about donut shops, you would naturally view Dunkin Donuts as lower risk than other brands in the space because you have seen their stores and been a customer in the past.
Established franchise companies bring to the table market awareness, brand presence, well developed operational systems, proven marketing plans and leadership teams that are generally deeper and more experienced than their emerging brand competitors. All these attributes lead candidates to see these established brands as lower risk and “safer” investments.
So, why does everyone not just wait for a brand to establish itself before they invest? It comes back around to the question of territory availability. As a brand develops, the territories with superior demographics will be gobbled up first by the early adopters. The longer that you wait to invest, the less likely it is that you will have your first choice of territory within the brand.
Is there a happy middle point? Maybe.
Many franchise candidates seek a combination of a brand with “some” proof of concept combined with open territory in their market. This strategy works better in some markets than others. For example, in my hometown of Pittsburgh, franchise investors can typically wait a bit longer for a brand to mature in other markets before they need to invest in territory in Pittsburgh. Typically, there are markets around the country that are “early adopter markets” such as Atlanta, Raleigh, Denver, Phoenix, and Nashville. Historically, these markets tend to adopt franchise brands earlier than “established markets” such as Pittsburgh, Chicago, Detroit and Buffalo. So, your decision whether to enter at the “emerging” or “established” stage is closely related to your choice of market.
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If you would like to discuss the details of brands at different stages of their development cycle or to evaluate the opportunity in a brand in a certain market, you can contact me by email or telephone to start that discussion.
Chris Cynkar – 412-877-2000 – ccynkar@franchoice.com.
