Buy Another Franchise: Aligning Customer Bases for Maximum Success

Expanding your franchise portfolio can be an excellent and smart investment, but it's crucial to consider several factors before making the leap. Whether you want your customers to align between franchises or not can significantly impact your decision-making process.

1851 Franchise spoke with Keith Liscio, Founder and President of Excelsior Franchise Center, to construct a guide to help you navigate this important choice.

First and foremost, you need to be sure expanding your portfolio is plausible. Time and finances in particular are critical.

“Do you have the time to devote to another franchise? Remember, the franchise discovery process itself can take months before even choosing the next franchise to buy,” Liscio said. “If real estate is involved, the process of site selection, negotiations and build-out can also take considerable time — often a year or longer.”

Liscio also advised reflecting on the timeline of the inception of your first franchise as a great way to gauge the time you’ll need to set aside for your next franchise investment, cautioning that “all of that is time taken away from your existing business.”

However, if after considering the time needed for an additional franchise you feel it is something you can commit to, you will have to also take a long, hard look at your financial situation, as well.

“Is your initial franchise profitable and spinning off extra cash? If it's not, you shouldn't consider another franchise until it is or you can exit,” said Liscio. “If it is, are there more benefits to expanding in the existing franchise than adding something new?”

Customer base alignment

If you’ve considered time and money and found that there are significant benefits to buying an additional franchise, then you will need to consider whether or not you want your new customer base to align with your existing business.

Deciding whether to align your new franchise with your existing customer base or not will have a big impact on your choice in industry and brand. Aligning customer bases can have its perks, especially when the services are complementary rather than redundant.

“If a new franchise has a customer base that aligns with your current one, the economies of scale can make it worth expanding into an additional franchise,” Liscio said. “Every dollar spent on advertising or sales calls becomes more efficient because the additional franchise offers more ways to serve the same customers.”

For instance, Liscio gave the example of a lawn care service having the ability to cross-market to customers needing pest control services. This allows you to diversify revenue streams and offer more services to existing customers.

“Once they know and trust you, they're likely to trust your other offerings as well,” said Liscio.

However, if you're considering a franchise that serves a different customer base, capturing these efficiencies becomes unlikely. But there can still be benefits of having a separate customer base with a new concept.

“It makes sense only if the potential returns seem to be greater than the returns in your current franchise,” said Liscio.

Diversification benefits

This decision requires careful evaluation of the potential market and financial projections. Beyond financials, there are also other benefits to diversifying into a different franchise brand. Expanding into a different franchise offers learning opportunities for professional growth.

“Another benefit of a different franchise is learning a new system and sharpening your management skills in a new way,” Liscio said. “That may help you in your existing business, or the skills you learned in your existing business may give you an advantage in your new one.”

If your initial franchise isn’t performing well, expanding to another franchise is rarely the solution. However, if you are well prepared for growth, buying another franchise is a smart investment. Adding another franchise to your portfolio can be a great way to challenge yourself and increase your earnings.

Choosing whether to align your new franchise with your existing customer base is a strategic decision that can have lasting impacts on your success. Carefully weigh the benefits and challenges, and make a decision that best aligns with your business goals and available resources.