Conversion Franchising—The Advantages of Adding it to Your Franchise System

Operations & Training

By Mike Hawkins

If a franchise company has not currently implemented a conversion franchising program, it is missing out on a great opportunity to increase the number of quality franchisees to their brand.  A main reason to implement a conversion franchising program today is because hundreds of new franchise companies have entered into the franchising world over the last few years, making the pool of prospects to reach out to much smaller for each franchise company.  With a smaller pool of prospects, as well as more difficult funding issues for new franchisees, conversion franchising can add a new dimension to any franchise company. It will help franchises continue building their brand in addition to what they are already doing to attract new franchise owners.  

Implementing Conversion Franchising

There are two ways to implement conversion franchising today.  The first is to offer a franchise brand to existing independent business owners in their industry. Secondly is to offer a franchise brand to independent business owners who need or want to diversify because of the current economic trends and business challenges the small-business owner is facing.  Let’s look first at independent business owners who need or want to diversify.  Several industries over the last few years have taken a hard hit because of the economy.  

Many independent business owners were doing several million dollars of business a few years ago and are currently only bringing in a few hundred thousand dollars of volume per year.  Many of these business owners are open to diversifying because they want to replace the income they once had.  Also, many are looking for additional ways to keep their good employees and ensure that their employees’ families don’t have to go through struggling times as others have had to do.  

In addition, several of the independent business owners are involved in industries that have gone through tough times over the last two or three years.  Many of these industries don’t look like they are coming back to their former glory days.  This makes conversion franchising a lifesaver for many independent business owners and their employees. 

The first step to conversation franchising will be to identify what industry they want to begin to offer their franchise to the existing business owners.   The second type of conversion franchising is to offer a franchise brand to independent business owners who are in the franchise company’s industry and are currently providing the same services the franchise company is offering to the consumer.  There is a percentage of business owners out there that also had a good business when the economy was strong and their business’s sales volume has also dramatically decreased during the slowdown of the economy.  For many, their business volume declined not just because of the economy. They were only getting business through demand for their services in a good economy and not because of the great standing in the community they thought they had.  They were unaware they did not have the business systems or skills they needed to take action on what would have helped stabilize or improve their business as the economy went down.  

New Revenue Avenues

Today, many business owners are still waiting for the economy to turn around while their business continues to decline.  They are not doing anything new or different today than they were doing when the economy started to fall.  Quite frankly, most independent business owners don’t know what they should do to improve their growth or maintain a business during a slow economy.  Most independent business owners do not have good marketing systems, sales systems, aggressive Internet and social media, any buying power, and so forth which would help them to compete better and attract new business.  What’s great for franchising is that these independent business owners need help to stay in business and provide for their families and their employees. Many independent business owners are very receptive to finding additional and new methods to improve revenues they have lost over the last couple years. If a franchise brand has better systems, training and coaching than an independent business owner currently has, the independent business owner can improve his business results by replacing his systems with the stronger systems the franchise brand has.  The benefits to the franchise company of offering its brand to existing business owners is just as strong as the benefits to the independent business owner.  Even though the economy has slowed for many business owners, many still have a good income and good assets.  Their current income allows them to start another business that will not be responsible for paying their personal overhead.  Many times the amount of capital needed to start a conversion franchise can be much less because of the income of the owner’s current business. 

Another benefit to the franchise company is many independent business owners have a great banking relationship with their local bank and raising start-up capital can be much easier.  If a franchise company makes the decision to start a conversion franchising division, the first step will be to identify what industry they want to begin to offer their franchise to the existing business owners. The next step is to research the available marketing methods to reach those independent business owners.  Once those areas of marketing are identified they can begin to attend industry trade shows, place advertisements in their industry magazines, start direct mailing or implement an e-mail campaign to those business owners they have found in the industry they are targeting.  Another step that can help in building a conversion division is to study why business owners fail or stop their businesses from being more successful.  An excellent book to read is E-Myth Revisited by Michael Gerber. The information in his book will help to identify what systems a franchise brand might have that the independent business owners don’t have. Also it will identify what a franchise brand can use to affect the growth and bottom line of the existing independent business owner’s business.  Whether a franchise company is offering their franchise to help existing business owners who want to diversify or to business owners who want to improve their existing business, the franchise brand and systems can improve their personal and business life for the better. And by bringing in quality independent business owners, franchise companies have another avenue to grow their brands.  Both the independent business owner and the franchise company will benefit from adding conversion franchising to their franchise system.

Mike Hawkins is vice president of franchising for the The Dwyer Group. He can be reached at 254-745-2400 or