A key part of the appeal of a franchise brand you're considering, is how much market presence it has now, as well as how much it will have in the future..

Why?

Because, put simply, if you have more locations, positives are apparent for the franchisor and franchise owners. The positives, amongst other things, are;

• Higher brand awareness,
• More marketing budget (more locations paying into the marketing fund),
• Better buying power (due to higher volumes needed),
• More funds broadly for operational support, and so on.

A key claim that you see some franchisor brand owners make from time to time, is one about how many locations they plan to be opening in the future.

The words 'plan to open' is often mentioned, but the psychology of throwing a big number out there and continually referring to it, effectively suggests it's happening. At least for the purposes of pitching the business!

GUZMAN goes so big

A brand I’ve often mentioned around this sort of claim, is Guzman y Gomez.

Now, I’m quite a fan of what they do and how they do it. They look, from the outside, to be building a strong brand and system.

However, they are the kings of claiming big numbers as to how many locations they are going to have in the future, and they use that buzz to demonstrate size, and future potential market presence, impact and value.

I expressed surprise a little while ago, when I saw that Steven Marks, Founder and CEO of the business, said they were going to open 500 locations across Australia.

In my numbers, on a per capita basis, with existing brands, and the planned 500 GYG stores in Australia, means that we will have about the same number of Mexican restaurants that America has for it's heavily Mexican-influenced population! 

It just didn’t feel right at the time, and still doesn't to me.

Well now, according to the recent report Guzman y Gomez CEO wants to sell Mexican food to Mexicans, that number has apparently been upped to plans for 600 future GYG locations in Australia!

This is at a rate of 30 new locations a year for the next 15 years.

“Can you remove it?”

Entirely separate to my GYG example above, we’ve actually been asked before by another brand, if we could erase or change content on our franchise buyer site regarding claims made years prior, about how many locations the brand would have opened across a time period.

Of course, we said no.

I encourage brands to be open and transparent about their aspirations and growth plans. I think this is a great thing, as it gives a future picture for what you may be investing in.

However, it’s only one very small part of the picture.

And, if they deliberately inflate the numbers to make their offer look sexier, then that's a problem.

As a buyer, it is just as important in my view for example, to be armed with the knowledge that ‘XX brand said in 2015 that it would be opening on average 20 locations a year to end 2020.’ 

Yet as seen in 2022, ended up averaging 5 a year (again, just an example).

This information is entirely relevant - and crucial to your decision making, as it should prompt you to ask, ‘what happened?’.

And ‘what happened’ to plans big enough to announce to the world back then, should be integral in your decision making now if they were so far off the mark.

Why is this important?

I think it's important as I clearly remember for two or three years in a row, standing at several franchise expos a year and talking to several frozen yoghurt brands.

They were all full of big 'plans' and 'forecasts' on numbers of store openings in Australia that they were going to do.

Do you see many frozen yoghurt stores around the country now?

Just be a little wary, that’s all

Throwing out big future numbers is so easy to do, and its impact is real.

It excites, entices and attracts people. It helps feed peoples cognitive bias.

It actually suggests high demand for a brand - not ‘actual’ demand, but they (the seller) are saying the demand will be there by suggesting they will open up XX numbers of stores by XX date.

Now, in GYG's specific case, there is no doubt in my mind that they will have several hundred locations at some point. You can see it in the way the brand operates and in how they are tracking.

It is actually a rare and great example of almost intimidating the market by ramming down its throat how big it says it is going to be. 

It’s great positioning of the brand in a marketing sense.

But for a buyer looking at any franchise talking up future numbers, you need to make sure you are entirely focused and comfortable with your single unit location trading forecast numbers, and not be romanced by broad brand ‘blue sky’ numbers. 

They are nowhere near as important as what you and the advisors you have engaged predict that your own single location business will be trading into the future...