Making Your Community The Secret Weapon in Rapid Franchise Expansion Why local support and customer investment could be your franchise's ticket to unprecedented growth.
By Kenny Rose Edited by Carl Stoffers
Key Takeaways
- While many franchisees look to banks for financial support, an untapped potential source of funding lies in the community and the existing customer base.
- There's a growing interest in alternative investments, especially among younger generations.
- The integration of consumption and investment patterns indicates a promising future for franchisees who can tap into this behavior and capitalize on community-based crowdfunding to fuel their growth.
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When you've got something good, you want more of it. That's basic psychology. And if you've got a successful franchise, the natural desire is to put your foot on the gas and expand as rapidly as you can. But what's the best way to do it? The last thing you want is to sacrifice quality in the name of quantity.
I always tell franchisees three things: First, don't even think about growing until you have great general managers in place. Second, start your initial growth with more locations of what's already working. And finally, once you have several successful locations, ramp up expansion with franchise brands that complement each other.
The first and second are pretty obvious. As for the complementary brands advice, it's vital to stick with a target audience that you know works. For example, if you've done well with a gym franchise, expand to a smoothie franchise because you'll naturally end up marketing to the same customer base.
Customers: A big part of financing your success
Having the greatest staff and growth plan in place means nothing if you can't finance it. Most franchisees turn to the bank for money, but there's a secret weapon sitting right in front of you: your community. Included in that, of course, is your existing customer base. The people who come through the doors all the time are your biggest promoters. Of all the ways they could spend money, they choose to do it with you.
Most franchisees turn to the bank for money, but there's a secret weapon sitting right in front of you: your community.
The potential doesn't stop there, though. The time you spend cultivating relationships throughout the community can turn into money in your pocket. Even if they're not current customers, they live and work where you do — and if the opportunity is right, they can turn into your next investor.
Imagine what can happen if all those people own a stake in the business. Not only would you end up with money to expand, you'd also get more word-of-mouth advertising than you ever could have dreamed. Instead of you having the sole set of boots on the ground, trying to drum up support throughout the community and encourage new customers to come through the door, you could have hundreds — or even thousands — of boots on the ground helping to expand your footprint.
Related: Become a Franchise Owner in 5 Easy Steps
From Celebrities to Crowdfunding
Celebrities are great examples of customers and community members turned franchise investors. Jimmy Buffett has such a passion for Krispy Kreme donuts that he co-invested in multiple locations across his adopted home state of Florida. Pro golfer Phil Mickelson is such a big burger fan that he invested in several Five Guys franchises near his home in California. Rick Ross rapped about his love of Wingstop's lemon pepper wings, then invested in 25 franchises.
But you don't have to hope that a celebrity lives close by or that one of your regular lunch buyers will pony up tens of thousands of dollars. Instead, franchise crowdfunding can turn every loyal customer into a potential business investor. Even if they just have $500 or $1,000 to invest, they can help fund your future in exchange for equity.
Related: The 9 Provisions Every Franchise Agreement Needs to Have — and What They Mean
Interest in alternate investment is higher than you think
Franchises are a type of alternative investment — the same category as real estate, crypto, and collectibles. Going beyond the traditional world of stocks and bonds is a popular way for investors to diversify, and in the case of franchises, to add some stability to their portfolio. While the crypto rollercoaster generates endless headlines, franchises are quietly sitting in the background, steadily adding more establishments, more jobs, and more economic activity, totaling an estimated 4.2% increase in the GDP in 2023.
That's why investors are so bullish about them — and the alternative investment market as a whole. In FranShares' new State of Alternative Assets report, which is based on a survey of 1,000 investors with more than $10,000 in investable assets, Americans are looking to allocate more to alternative investments, with the younger generations leading the way. More than 60% of Millennials and Gen Z increased their portfolio allocation to alternative investments in 2022. While the majority of Baby Boomers and Gen X reported holding steady in their portfolio allocation this year, over 20% of each group already dedicates more than 25% of their portfolio to alternative investments.
This isn't the result of crypto buzz, though. In fact, interest in investing in business alternatives (like franchises) and collectibles outweighs cryptocurrencies and NFTs. Bottom line, investors of all ages are aware of — and interested in — alternative investments. Your customers and community members are most likely among them.
Investing in products you use is a thing
Fans investing in franchises they love isn't restricted to celebrities. Americans of all ages invest in what they already use — and use what they invest in — and Millennials and Gen Z display an especially intertwined relationship between their consumption and investment patterns. According to the State of Alternative Assets report, 81% of Millennials and 78% of Gen Z were more likely to invest in a product they use. Similarly, 81% of Millennials and 75% of Gen Z indicated they were more likely to use a product they invest in, which means you should expect those community investors to also become customers.
Americans of all ages invest in what they already use — and use what they invest in
This is something we've seen in the traditional investment world for years — people who own Apple stock are more likely to have an iPhone, and those who have an iPhone are more likely to own Apple stock. Now we have data that proves we can leverage the same behavior in franchising.
In fact, this is an easier lever for franchisees to pull because they get to tap into strong, already-existing brand awareness and affinity. The moment they open the door, they have a fan base. As a result, I always say franchising allows you to skip the first five to ten years of business ownership. Combine that with what we're seeing in the newest data, and it's easy to see that community-based franchise crowdfunding is the fastest way to grow your empire.
