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How to Create Multiple Revenue Streams for Franchisees Without Compromising Your Brand

Franchising World May 2012

 

By: Mike Lassiter

 

When the economy went south, many franchisors began discounting products or services. Restaurant franchises began shrinking the size of portions on their menus, while retailers began offering flash sales, and home improvement franchises began discounting services. While these tactics may have kept these systems afloat for the time being, most franchisors would agree that, in the long term, they risk diminishing the value of the brand.

Rather than making their customers accustomed to this new “discounted mentality,” franchisors should take a look at how they can grow their systems by enhancing service or product offerings through creating additional revenue streams.

Multiple revenue streams are important in any franchise. They provide a time-tested way for an owner to reduce risk and allow a more predictable cash flow from a variety of sources, rather than relying on a single, traditional product or service. When multiple revenue streams are created, franchisees have the ability to reach the same loyal customer more often and with more touch points.

When exploring multiple revenue streams for franchisees, it is imperative to ensure the new product or service fits in with the brand’s core beliefs and services. Additionally, it should be of value to the franchise’s core customers and be simple and easy for franchisees to execute. These new offerings can set a franchise apart from the competition, while breaking it into new markets.

No matter the industry, practically any franchisor can create multiple revenue streams for its franchisees. When thinking about what new avenues to create for a franchise system, there are a few things to keep in mind:

Take a look at the franchise’s products or service offerings. How can they be better? Can they be freshened up?
Whatever the brand specializes in, do it better than anyone else. Be the go-to company and don’t let a competitor slip in and grab the spotlight. To achieve this, products and services should be consistently monitored to see where enhancements can be made. For a computer services franchise, exploring the possibility of offering a cloud computing service offering for franchisees to sell may be an added value worth pursuing. For restaurant concepts, this could be exploring a new day part, adding desserts, private labeling sauces, and so on.

Think beyond the business address. What new ways can consumers be reached?
Whether the franchise locations are home-based or brick-and-mortar, there are always methods to make the business more accessible to consumers.

At our fast-casual franchise, Rising Roll Gourmet, we have developed additional revenue streams for franchisees that allow them to serve consumers beyond their individual franchise location. We started with catering and have expanded to an express concept that franchisees can open nearby in non-traditional venues, such as Class A office buildings. While food may be pre-prepared at the full-model restaurant, our express locations generally have an oven and a fridge which allow them to sell a majority of our regular menu. This provides the opportunity for consumers to easily grab their favorite Rising Roll Gourmet item during their lunch break without even leaving the building.

In addition, for office buildings that may not have the retail space for a restaurant, we have developed Grab & Go stations that franchisees can offer to local landlords. Participating locations make a limited number of boxed lunches fresh daily in their restaurants to be sold that day at the Grab & Go station, which is simply a table set-up in a lobby of the building. Unsold lunches are never sold the next day or thrown out. Instead, franchisees immediately offer the complimentary lunches to local personnel in charge of catering. This is a great opportunity to take what could have been lost profits and turn it into a new catering customer.

Multiple Revenue Streams: Ideas for Any Industry
A pet services franchise that specializes in dog training may add educational seminars, retail sales, and room rentals for local dog trainers to its collection of services. These added avenues bring in new customers who will see the variety of other services the franchise offers. This encourages spending on other products and services while at the location.


Ensure that the new product or service fits in with the brand’s core beliefs and services.

A retail franchise that specializes in a niche product may add an online retail site. The benefits to this are threefold:  franchisees’ store inventory is expanded, making them less likely to lose a sale if a certain color or size is not available in the location; consumers will value shopping with this retailer because they know they’ll be able to get the product they want, regardless if it is in stock or not; and franchisors will bring in new revenues from consumers who simply choose to shop at home. Additionally, franchisees can open kiosks in local retail centers to sell a limited selection of its products. This increases the brand’s visibility in the market and makes it more accessible to consumers.

An automotive repair franchise may begin selling a variety of car care products, including cleaners, emergency car kits, floor mats and accessories, and aftermarket car parts. These products fit in perfectly with the franchise’s service offerings and are an easy add-on for employees to sell to new and existing customers.

Beyond adding a product or service, a new revenue stream can include a franchisee becoming more involved in the local community or with customers through sponsorships or hosted events. Corporate social responsibility should be part of every franchise’s management strategy. From simply joining the local chamber of commerce to sponsoring a local sports team, encouraging franchisees to be involved within the community will help build loyalty among new and existing customers.

Survey customers. What do they think the franchise can improve upon?
Customers are what keep the franchise going and their feedback is invaluable. The franchisor is engrossed in the brand day-in and day-out, but a customer—whether new or long term—can offer priceless insight on products and services. Make the survey easy to complete and consider offering an incentive to customers.

Supporting Franchisees and Encouraging Them to Pursue Additional Revenue Streams
Any change in a franchise can be difficult to implement throughout the entire system. When the change is optional, encouraging franchisees to pursue new avenues for revenue can be especially challenging.
Of course, the franchisor should test the new product or service before rolling it out systemwide. Start with corporate locations or select franchise owners who would be willing to complete the testing. This will help identify what works and what doesn’t work.

Once the new product or service is perfected, bring franchisees to these tested markets to experience the benefits first-hand. If the new revenue stream involves working with another local business to sell or partner with, the franchisor should travel to each franchisee’s market to begin the first deal. Bringing franchisees directly into the process gets them involved and gives them a better understanding of the new product or service. Once the deal is finalized, the franchisee will feel comfortable and be excited to continue expanding this new avenue throughout their market.

Remember that any new revenue stream added to a franchise system should bring long-term, added value to both the company and its customers. It should be easy for franchisees to execute and fit in well with the brand’s niche products or service offerings. In the end, it all goes back to the philosophy that it’s never good to put all your eggs in one basket. The more opportunities available for franchisees to bring in revenue, the more sustainable your franchise brand will be.

Mike Lassiter is the president of Rising Roll Franchising Concepts, LLC. He can be reached at mike@franchisingconcepts.com.