Expanding the Brand Beyond Its Core Market
Using focused market concentration versus a “see-what-sticks” strategy for intelligent brand growth.
There are some brands that have been and always will be regional fan favorites. They’ve thrived in those markets for decades and continue to grow. If and when the time comes to expand outside of the core market, where do you start? It’s a question that has been asked by every national and international brand as it too, had to start somewhere.
Find Your Fan Base
Togo’s has a 40-plus year history and strong brand presence in California, so we have found success expanding in cities that are home to California transplants. As our raving fans have migrated east, so are we − predominantly in Arizona, Colorado, Idaho and Utah − as well as Oregon and Washington.
We see the perfect opportunity to grow in areas where some of our long-time guests now live. This provides for a built-in fan base, which helps ensure success for our brand and for our franchisees. Often your best franchisee is the greatest fan of the brand, so finding these expansion markets and focusing on growth in those markets can also result in finding passionate operators.
Fans can be your best resource for scouting new locations. Earlier this year, Quaker Steak & Lube began using Facebook to ask fans to vote on where in the country its next restaurant might be developed. During the “I Want My Quaker Steak & Lube!” campaign, thousands of fans participated and voted Toledo, Ohio, to the top of the list. The company is currently seeking development areas within the Toledo area to begin building a new location.
Focus on Infrastructure
Before deciding to expand outside of your core market, ask yourself if you have the infrastructure to support it. When you enter new markets, it’s much like being a pioneer where access to core resources and infrastructure can make or break your efforts. There’s an important tether that needs to be managed between your core market and the new one. That sometimes gets lost, but it’s very important to maintain.
In January 2013, Dunkin’ Donuts announced it opened markets for development in California. This was big news as the brand had been steadily growing both east and west of the Mississippi, maintaining its disciplined approach to expansion, while focusing on initiatives to improve restaurant economics and franchisee profitability. First, several markets in Southern California became available, followed by additional markets in the state’s Central Valley and Central Coast this past Fall. Over time, Dunkin’ Donuts has plans to develop 1,000 restaurants throughout the state, but only because the brand knows it has the infrastructure and resources to support such growth.
Do Your Research
When deciding where to expand, don’t just throw a dart at a map. Our vision is not to open restaurants everywhere and see what sticks. Our philosophy is to do what will help our brand and our franchisees succeed. We conduct a significant amount of research about potential territories to make sure there are good demographics that fit the targeted profile of our core consumer.
Ask yourself, “What is the potential for consumers to use our brand?” For example, the consumer development index for your product or service category in a big city may easily fit your criteria, but more research may be needed in smaller towns where local trends and lifestyles may apply.
Real estate availability can affect the decision to break into a market, as well. Can the market support a new brand entering a possibly crowded market? What is the price of real estate? What about labor availability and cost? Togo’s works hard to ensure we are entering markets where it can get great sites and have service-focused employees in our restaurants.
Also, consider the competitiveness of the market. For Togo’s, competition is a good thing. It not only raises category awareness, but also creates opportunities for our products. But not every brand operates that way, so be aware of the competitors that already have a strong presence or who may be entering soon. Early market entry in your category can create an advantage, too.
Last summer, Burger 21, a franchise founded by the owners of The Melting Pot Restaurants, Inc., announced plans to expand into New York just a day after Fatburger opened its first location in Midtown. An article in the New York Daily News called it a “Burger Invasion!” This helped boost awareness for the nine-store chain in a new market.
Is your brand ready to expand beyond your core market?
If you’re not sure, ask yourself these questions:
- Where are your fans living and working?
- Where can your infrastructure support expansion?
- If you don’t have the infrastructure to support expansion in a certain market, what do you need to do to get to that point?
- What is the potential for customers in the market to use your brand?
- Is real estate available and affordable?
- What competitors are already in the market? Which ones are scoping it out?
- If attending an upcoming franchising show, do you have a clear strategy to get the most out of your time there?
- How quickly can you expand to the market while ensuring a successful launch?
- What steps can you take to build buzz before you open?
Make the Move
There will be a point when our brand achieves two very important things: saturation of the markets west of the Rockies and reaching critical mass in our core markets. When that happens and we are confident we have a sound strategy in place and the resources to expand east, we will. It is important to confirm your brand will have the supply chain, restaurant support field services and sufficient brand penetration to ensure a high probability of success for your franchisees.
Speed to market is also very important. The fast casual industry is expanding so quickly that more potential competitors are appearing every month. While it’s possible to accelerate entering new markets, it should be done in a way that ensures ample resources are available and qualified multi-unit franchisees are in place
Pre-opening marketing buzz is a key ingredient to any successful market entry, so start early. We focus on a combination of public relations, digital media, advertising and social media like spreading the word through the Togo’s Tribe sandwich club and on our Facebook page. Promoting grand opening activities, giveaways and contests can build excitement prior to opening day and drive customers into stores. And while creativity helps, even something as simple as free gift cards creates happy customers and encourages repeat visits.
Tony Gioia is chairman and CEO of Togo’s Holdings, LLC, a franchise-based business that offers online ordering and catering services and has more than 300 locations open and under development along the West Coast. Find him at fransocial.franchise.org via the directory.