When your current locations are strong and steadily growing, you might start considering where else you can open a franchise location. Identifying new business opportunities goes deeper than finding a convenient place you don’t currently service.
Consider these seven criteria when choosing new regions for expansion to guarantee that the new location will thrive.
Key Takeaways:
- Find areas similar to your successful locations in customers, amenities, and opportunities
- Use data to identify new sites, analyze the competition, and find unique marketing opportunities.
- Network with successful businesses to understand how to succeed in the new region
1. Understand the Area’s Consumers
The most important criterion for choosing a location is the customers you’ll reach. You want to ensure the new region has a customer base that matches your current segmentation.
Start by collecting customer data from your database and crafting several customer profiles that match your current successful markets. These profiles will tell you what type of consumer or business will most likely purchase your products.
Use that profile to find other opportunities for a new business with consumers in a similar demographic.
For example, some key data points to look at include:
- Age
- Gender
- Place of Residence
- Education
- Occupation
- Income level
- Lifestyle
You can also consider new needs you can fill. For example, a new location can reach a market with different needs unique to that region.
Once you’ve established who you will reach, you will also look at how large that market is in the region. You will see the greatest success in a market similar to or greater than the markets in your current locations.
2. Follow the Region’s Economic Health
How healthy is the economic environment of that area? For instance, if businesses in a new region struggle to keep their doors open and consumers dig to the bottom of their pockets to make daily purchases, you might not want to add a new location in that region.
Three factors to monitor to determine an area’s economic health include:
- What’s the inflation rate?
- What’s the unemployment rate?
- What’s the region’s growth rate of gross domestic product (GDP)?
For example, if you were to expand into a new region with higher-than-average interest rates, that would impact the cost of purchases. The high-interest rates also mean your buyers may be spending more on staples and might be unable to purchase your goods.
A healthy region will have a rising gross domestic product and stable inflation rates.
Source: bea.gov
The politics in an area can also shine a light on the economic health of a new region. An economically and politically stable region will afford more security to future business opportunities to promote growth and expansion.
3. Look at the Competition
Who else is in the new region, and how tough is the competition?
If other businesses have flocked to a new region, you might have a more challenging time beating them unless you have a solid and unique value proposition for the consumers. Your new location will do best when there is little to no competition for the same goods or services.
If there is some competition–which is very likely–you can research that competition to see what they’re doing to attract consumers. You can also find areas where they fall short, filling those gaps and getting an edge in the new market.
Three-quarters of enterprises say their most significant competitors use data analytics to differentiate themselves for clients, media, and investors. Collecting and analyzing data will also be your biggest asset and can place you above the competition that doesn’t use customer data.
Source: MediaDigi
4. Examine the Accessibility
If your new customers can’t get to the new location, then your location will struggle even if there’s a demand for your products and services. Choosing where in a region to expand depends on roads, visibility, and marketing opportunities so your buyers can see and access the business.
In addition to customers, also consider your supply chain. For example, can trucks easily access the store to bring in new products? Is the location close to manufacturers?
5. Consider Your Staff
Consumers aren’t the only people holding the expansion’s success in their hands. The employees at the new location will also play a huge role in how well your new location fares.
Does your staff require specialty training or knowledge? You’ll need to find regions with talent in your field to keep your new location fully staffed. Studying a region’s demographics, like educational level, can give you a glimpse into the available talent pool.
However, you can also move into a new region and offer training to ensure your new employees have the talent necessary to succeed.
Another staff-related consideration is the compensation of the area. Some areas have a much higher cost of living and may require higher wages than your other locations. For example, the minimum wage in California is $15 an hour, whereas the minimum wage in Idaho is $7.25 an hour.
If you can provide the necessary compensation and training to help your staff succeed, you have a greater chance of that success overflowing to the location as a whole.
6. Research Current Businesses in the Area
Many of the other businesses in the area can be your ally. Connecting with a region’s business community will give you a foot up before expanding into the new location. For example, other businesses can provide valuable customer data, leads, and advice for reaching the community and will help you identify business opportunities.
You might also partner with local businesses that have the trust and loyalty of the community and build on that trust to make your mark in the area.
7. Work Through the Logistics
What are the physical needs of your business? For example, does the new location need access to specific amenities or equipment?
Look at your successful franchise locations to determine what you need to run a business. These logistics might be a specific space requirement, distribution channels, or support channels. For instance, if your company uses several vehicles for distribution, you might look for local mechanic shops nearby that could service those vehicles to keep them running.
Find New Business Opportunities for Your Company
MXTR helps you identify new opportunities by building a database from your current locations. Use the system to track and analyze which regions perform well and which need extra assistance. Then, you can consult that data when searching for new locations similar to your best-performing markets. That way, you can expand where you’ll make the most significant impact and find the largest number of target customers.
Schedule a demo to discover new opportunities for your franchise expansion.
Featured Image: istockphoto
