IF YOU’RE A FRANCHISOR WITH MULTIPLE FRANCHISEES, HOW DOYOU REDUCE THE RISK OF FRANCHISEES CANNIBALIZING EACH OTHER?
Franchise operations like McDonald’s famously disallow individual franchises from operating across the street from each other.
That’s because franchises located too close to each other would eat into the other’s business. In the end, both individual franchises would lose revenue, and the McDonald’s corporate brand as a whole would perform well below potential.
This is partially why McDonald’s founder Ray Kroc once said, “My business is real estate,” rather than hospitality, foodservice, or franchising.1
Analogous problems happen online too.
For example, when you have a consumer who searches online for your brand or for a product/ service that your brand offers, it’s all too easy for them to end up at the wrong franchise website or directed to the wrong product or service offering.
Even worse, they often end up trapped in an ecommerce channel even when they wanted information about retail outlets, or vice versa.
This is a nontrivial problem for brands and franchises. If we were to update Kroc’s business mantra for the modern marketplace, we might say a modern franchisor’s business is market access.
In other words, if you’re a franchisor with a multitude of individual, potentially independent franchisees, you want your franchisees to be successful both individually and in aggregate. Thus, you want each franchisee to be able to access the largest market share possible without ceding any territory, online or off, to other franchisees or other brands.
The challenge is that, with multiple franchisees, you run the risk of one cannibalizing business from the other. What steps can you take to prevent that from happening, especially online?
That’s the question this paper will address.
In ThisPaper...
1: Introduction
2: Localization
3: The role of reviews
4: Online alignment
In general, one of the best solutions is going to be intensive localization, like local SEO and geotargeting in advertising.
“Localization” can refer to several different strategies.
For one, it might mean aligning each franchise’s operations and online presence with the customs, habits, and culture of the area in which it is located. So, for example, a restaurant franchise location in the Middle East will ensure that all food offerings are halal, or meet the cultural and religious eating requirements of that area.2 Localization in this sense is a crucial element of successfully growing a franchise operation into new areas.
But when it comes to competitive differentiation without cannibalization, we mean something a little different, albeit related. It’s more in line with the concept of localized search engine optimization (SEO). Local SEO is a specialized form of SEO that focuses on capturing local web searches that people perform to find businesses in their immediate geographical area. After all, according to Social Media Today, nearly half – 46% – of all Google searches are looking for local information specifically.3
Franchisors will want to make sure that searchers looking for a local franchise will find the right one.
Some local SEO tactics are obvious (using keywords and key phrases that incorporate geographical indicators). Other tactics are more technical and/or involve off-site tactics, like getting listed in directories and third-party review sites to generate local “citations” that Google’s search algorithm likes. There is also an analogous process in online advertising called geo-targeting, where the business specifies geographic areas where they want their ads to show up. Consult with your SEO advisor for more information.
What does all of this have to do with competitive differentiation versus cannibalizing the brand?
If you are a franchise with multiple locations or multiple franchise owners, you need to make sure that prospective customers reach the right franchise for them. In most cases, that will mean the closest franchise. What you want to avoid is one franchise reaping the majority of the business at the expense of other franchises, or where the distribution of customers is inappropriately and unnecessarily uneven between franchises.
This presents a significant challenge for franchises that operate multiple locations, because online searches will tend to bring up either (1) the corporate brand or (2) the biggest location. Often, attempts to correct this problem just add to it. For example, even if corporate controls most of the online ad spend with a national ad fund, misalignment in localized messaging and insufficient attention paid to each individual brand’s online presence and SEO strategy can inadvertently continue to tip the scales.
As a result, a corporate-driven program may not benefit all franchisee locations equally due to inherent unevenness in how those campaigns are executed.
The only solution is to ensure that every location is optimized for local searches, so that a search conducted in a particular geographic area will reliably turn up the closest franchise as the top option. This requires strategy and a clear, well-articulated digital marketing plan that fleshes out end-goals, uses customer data, and emphasizes collaboration between corporate and individual franchisees.
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Localization Tactics |
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Keywords |
Geotargeting |
Territories |
Local Website |
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Optimize for keywords that include local indicators. The most obvious is simply appending the location: “Best pizza” + City, State. However, thereare other keyword signals as well, like “Best bakerynear me.” Make use of negative keywords too, or keywords that are specifically excluded from a campaign. That way, franchises can avoid competing for the same keywords. |
In online advertising campaigns like search advertising and social media ads, franchisors will want to get granular in determining when and where their ads appear. Focus on ZIP codes, for example. Further, specify that certain franchises should not appear in any searches located outside of their designated service areas (e.g., negative locations, the geotargeting form of negative keywords). |
What if territories overlap? In some cases, different franchise locations will necessarily overlap with each other. For example, one location may have a service or product offering that the other does not. So, if a consumer wants a basic service, they should be directed to the closest franchise location, unless that location doesn’t offer the specific service they need. |
The franchisor has a couple of options for handling individual locations online. Some will incorporate each location into their main website, giving the franchisee a single page. Otherwise will develop individual “micro-sites,” or miniature websites dedicated to each individual franchisee or location. Either will work, as long as you have the right strategy for getting customers to the right place. |
Reviews play a multifaceted role here, so review management is critical too.
First, reviews play an outsized role in local SEO.
Reviews are one of the most important factors in determining which websites get ranked at the top for local searches and in the Local 3 Pack (a listing of top 3 local businesses at the top of Google’s search results. In fact, reviews account for nearly a sixth (15.44%) of the weight alone; given that Google’s search ranking algorithm looks at around 200 different factors, that’s a disproportionate amount of influence.4
As a result, it’s crucial to cultivate and curate reviews simply to ensure that your individual franchise locations will be more likely to show up in appropriate local searches.
Second, reviews can boost not only individual stores but the whole brand.
“I tell the franchisees that a rising tide lifts all boats,” says Charles Watson, CEO of Tropical Smoothie Café, in a conversation with FastCasual.com. And reviews are one of the primary engines that drive that franchise-wide lift.
However, for reviews to work optimally, it’s important to set up a process that drives reviews for the appropriate location(s). Just as with franchise operations, there need to be standard operating procedures for soliciting and managing reviews. Additionally, make sure when you solicit reviews, you send them to the right place to review the specific store or location rather than the corporate brand, for example.
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Review management best practices for franchises and multi-location brands |
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1 2 3 4 |
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Have a company-wide view so you can see the whole organization. |
But make sure there are individual listings for each location or individual franchise. |
Organize your review response protocol so it’s consistent across the brand. |
Pay attention to both the best and worst franchise locations. |
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5 6 7 8 |
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Learn from the best and disseminate the lessons throughout the organization. |
Attend to the franchises with the worst review ratings; address any issues. |
Make sure your review request process drives reviews to the right franchise. |
Promote your review site listing to make it more visible and easier to access. |
DON’T LIMIT YOUR REVIEW MANAGEMENT ACTIVITIES TO A SINGLE REVIEW SITE, EVEN GOOGLE’S. GOOGLE DEFINITELY FAVORS ITS OWN REVIEWS BUT NOT TO THE EXTENT MANY OPERATORS MAY ASSUME. IF A FRANCHISE DOESN’T APPEAR ON MULTIPLE CREDIBLE REVIEW SITES, IT WILL HURT THEIR STANDING IN THE SEARCH RANKINGS. FURTHER, REMEMBER THOSE SIGNALS MENTIONED ABOVE: MAKE SURE YOU HAVE A GOOD NUMBER OF REVIEWS (QUANTITY) SPREAD ACROSS A VARIETY OF REPUTABLE THIRD-PARTY REVIEW SITES AND KEEP THOSE REVIEWS COMING; STAGNANT AND OLD REVIEWS ARE NOT NEARLY AS EFFECTIVE AS RECENT AND CURRENT REVIEWS.
Ensure all the pieces of your online presence are well-aligned, so visitors end up in the right place, even if they don’t start there.
When we talk about avoiding cannibalization, we mean making sure each franchise gets its fair share of access to the brand’s total customer base and business. Typically, that will be distributed geographically. Each location will be assigned, intentionally or in effect, a service area. Customers within a given service area will thus be directed to the franchise location for that area, not any others.
This is a nontrivial problem, and it affects more than just franchises. For example, giant retailer Target has struggled with its digital storefront inadvertently competing with its retail locations. “E-commerce is continuing to cannibalize brick-and-mortar sales,” Richard Gottlieb, CEO of Global Toy Experts, told CNBC.5
But it’s not only the brand’s perspective on this question that matters. It’s also the customer’s.
Look at it from their point of view. When the customer is looking for a service or solution that you offer, they want to be connected to the correct franchise location for their needs. That might be the closest one, or it might be a more distant one which offers the specific set of services they need.
Your brand’s job here is to create a system that ensures that your customer, no matter at what point they enter your sales funnel, always get to the right franchise owner.
Ideally, that means they end up at the right franchise right away. But if they end up in the wrong place, can your brand direct them to the right place quickly and easily, or even automatically?
For example, how do you handle customers who come to the brand’s corporate website when they really need to contact an individual location? Your website might require visitors to enter their ZIP code and use that information to shunt them to the right location.
In other words, what we’re talking about here is segmenting customers and creating a map or flowchart to understand where they want to go and how to get them there (see the figure below).
This means you can’t – or at least shouldn’t – allow individual franchise locations to silo themselves. Your franchise operation needs to work as a well-organized, collaborative machine.
In other situations, you might need to segment customers according to need rather than geography For example, if they need a specialized service or product offering that only certain franchise locations offer, you need to make sure that you offer some way for the customers to find what they’re looking for at the appropriate location, even if they end up on another location’s website.
Ultimately, standing out in the market without cannibalizing requires care and conscientiousness when designing and executing any digital marketing initiative.
References
1 https://www.fool.com/investing/general/2016/03/06/mcdonalds-corporation-a-real-estate-empire-finance.aspx
2 https://www.entrepreneur.com/article/300091
3 https://streetfightmag.com/2020/06/29/how-to-solve-the-franchise-ppc-cannibalization-problem/
4 https://moz.com/local-search-ranking-factors
5 https://www.cnbc.com/2020/01/15/the-real-warning-in-targets-holiday-sales-toys-are-in-trouble.html
