Nontraditional expansion has great potential for a brand while fueling system-wide growth.

By Bill Chemero, CFE

Franchising growth and expansion is a tough hurdle for many up-and-coming brands to overcome. More businesses and franchises are fighting for space and market share, and there are certain markets that are saturated with operators. Throw into the mix the continuing difficulty to access capital, and adding franchise units to your portfolio can be a daunting challenge. It is becoming more common for small businesses to explore other routes for expansion, such as tapping into nontraditional locations. The days of owning small businesses solely in strip malls are gone; companies are now turning to arenas, military bases, hotels, colleges, larger retail giants, rest areas and airports as locations. This trend has been driven not only by the big franchise players, but by emerging brands as well. While there are many benefits in nontraditional venues, such as lower start-up costs, potentially lower rent and lower monthly bills, there are also major risks to consider before executing a specific expansion strategy. Small businesses have to make key considerations and follow best practices when looking to chart a course into the foreign territory of nontraditional locations.ranchising growth and expansion is a tough hurdle for many up-and-coming brands to overcome. More businesses and franchises are fighting for space and market share, and there are certain markets that are saturated with operators. Throw into the mix the continuing difficulty to access capital, and adding franchise units to your portfolio can be a daunting challenge. It is becoming more common for small businesses to explore other routes for expansion, such as tapping into nontraditional locations.

Modify Your Concept

Nontraditional locations typically mean a smaller model regardless of your specific industry whether those are restaurants, service companies, travel agencies and so on. It is important your model remains recognizable and reflects your brand’s true identity. Many businesses face the challenge of scaling its unit to fit, but they must be flexible. Key considerations include design, hours of operation, equipment requirements, and alterations to products and services. For example, Wayback Burgers, recognized as one of the most aggressive and ambitious better-burger brands in the United States, has recently expanded into the Wells Fargo Center in Philadelphia. Hours of operation had to drastically shift to accommodate the schedule of arena events at the venue. With short intermissions and roughly 20,000 attendees, Wayback Burgers had to create a limited menu to speed up the typically relaxed fast-casual style of service it implements in traditional locations. A final consideration is price points. Because of potentially higher overhead costs, extra fees and a captive audience, price points typically increase between 20 percent and 25 percent. For nontraditional locations without limited hours of operations, such as airports, the unit may frequently be among the chain’s highest volume-units, doubling a typical store’s customer traffic.

Strengthen the Advantage of the Captive Customer

One of the greatest advantages of nontraditional locations is that they serve captive customers. A way to strengthen this advantage is to customize products and services to their unique needs. This may include adding convenience factors and new features to the product or service. For example, restaurant businesses opening on military bases may explore the option of adding breakfast to their menu to meet the demand of early risers in the military community. Wayback Burgers has nontraditional locations in partnership with the Navy Exchange, including a location in the Naval Base Ventura County in Port Hueneme, Calif. which enjoys high breakfast sales each day.

Understand Financials

The investment, operational costs and unique shipping and distribution fees of nontraditional locations vary, and also include the involvement of additional parties. For example, the rent is much higher in the private sector (i.e. malls and airports); about 20 percent to 30 percent higher, whereas for military bases, the rents are very low. Another consideration is the tenant-landlord relationship. It is important for businesses to create a close relationship with the host location to maintain finances and conduct status updates.

Strategic Selection of Owners

Development in nontraditional venues often involves single- and multi-unit owners with solid experience in their industries. Stadiums and airports have high security, which makes it difficult even for experienced institutional-type operators to get qualified through the vetting process. Businesses and owners seeking to expand into this venue should understand it will take time, but the payoff could be huge. Above all, just as with traditional locations, the owner must possess a passion for the business and have exceptional leadership skills. Training of nontraditional location employees becomes crucial in the success of the business. Nontraditional locations are serving customers who come in during unique hours and often all at once. For example, businesses located in larger retail centers, such as travel agencies or home improvement businesses, will see a larger rush during the lunch hours in which consumers are breaking from traditional nine-to-five work hours. Similarly, when classes are dismissed on a college campus, restaurants will often experience a flood of customers and then have no traffic until classes are released again. This puts a lot of pressure on the employees to be efficient with their services during the high- and low-volume waves. Exploring the route of nontraditional expansion has allowed brands to establish a competitive advantage, differentiating them in the crowded marketplace. Businesses are gaining more exposure, reaching a different customer base and generating new leads. If done correctly, nontraditional expansion has great potential for a brand while fueling system-wide growth.  

Bill Chemero, CFE, is executive vice president of Wayback Burgers. Find him at fransocial.franchise.org.