When your franchisor allows another franchisee to open near your facility, the situation can get dicey if the two operators don't work together.
Franchisors often specify a protected territory for franchisees, but in large cities such as Chicago, that territory can be as small as one mile, making it important to work with other franchisees under your brand. (Photo by Thinkstock.)
A fraternity exists among franchise owners, a commonality unlike any that an independent business owner could feel even with his or her own industry brethren. I have experienced this firsthand having been a franchise business consultant for more than 20 personal training studios in the New York, New Jersey and Pennsylvania areas. And like any brotherhood, the bond can be strong sometimes and challenged at other times.
Recently, I was informed by my franchisor that another studio within our franchise brand would be opening in the Chicago area not long after my studio opens. It's important to note that most franchise disclosure documents independently define exact territories. My franchisor stipulates that a one-mile radius around one franchisee is considered a protected area from another franchisee, but in a city such as Chicago, one mile can be worlds apart. So, although overall this is great news for the brand, I approached the information with a certain degree of trepidation and a flurry of questions. Would these other owners be cooperative or adversarial? Would they see me as a threat or a partner? Would they be open to sharing expenses, labor, marketing costs and event promotions? There was only one way to find out. So a few weeks ago I set out to meet with the two newest owners of my fitness studio franchise.
Nice to Meet You?
As I previously mentioned, I have witnessed several versions of the franchisee owner relationship. Some have been congenial and some have not. I once worked with two franchise owners who were located less than two miles apart and refused to speak to each another. I was hoping to avoid a similar scenario with my two new "co-workers." To my relief, both were approachable and knowledgeable. Even though they were coming from the world of personal training, they still had a strong grasp of the studio concept, solid foundation in exercise science, obvious business acumen and previous useful interactions with the franchise support center. We had a frank discussion about what was working and what was challenging with the franchise as a whole. It turned out to be an honest and straightforward talk about where the brand could go and how we collectively could get it there for our area.
Let's Make a Deal
This successful meeting was followed by our first big decision as a local franchise group. Ours would be the first few sites to be located in a major metropolitan city. Therefore, the pricing model that we would employ would differ slightly from the other studios opening in the slightly more suburban areas of say Colorado, Virginia and Massachusetts. And this is significant. The knock on franchising is that the franchisor controls everything from the marketing to the pricing down to the color of the carpets. This example is proof positive that that is not always the case. Given our market and the relative newness of our concept, we were encouraged to set pricing in line with our assumptions and experience for what would be competitive and successful for our locations. By way of example, Orangetheory Fitness does something similar in Chicago in that it has different package pricing for suburban and urban locations that may only be a few miles apart. My concept is still in the early stages of development and is willing to let the franchisee experiment to see what will work. After long discussions and several financial models, we were able to go back to the franchisor with a pricing scenario that we felt would make our studios competitive.
The whole experience was a major relief. Not only was I able to establish a friendly working relationship with my new franchise partners, but we also were able to navigate what could have been a fairly ugly pricing dilemma. As of right now, it seems as though I have lucked out. The short-term foreseeable future for my franchise concept in Chicago seems to be aligned with owners with a similar vision, growth strategies and operational focus. Taking stock of what the franchise concept has afforded me so early on, I realize that I have local partners with whom to create and expand the brand with, a franchise support center that will provide me with marketing assistance and operating knowledge I need and a network of nationwide franchisees to learn from. Sometimes it's good to be another number.
Matthew Cicci is a freelance fitness writer and small business owner in the Chicago area. With more than 15 years experience in the health and fitness industry, Cicci has operated businesses in the not-for-profit, commercial, private, franchise and residential fitness environments in the New York market. Cicci has held several industry-wide certifications, has a bachelor's of science degree in management and studied under the master's program for exercise science at Syracuse University. He can be reached at firstname.lastname@example.org.