Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Pop-Up Events to Test New Markets
Transcript
- Lucas: So Luna, you remember that fitness franchise we visited last spring — the one with the orange branding and the semi-private training model? Luna: Yeah, the one that was thinking about expanding into the next county over. What about them? Lucas: They just ran a series of weekend pop-ups in two potential markets instead of committing to leases. And it worked so well that they've got a formal process for it now. I think that's the story we should dig into today — how franchisees can use pop-up events to test new markets before they sign a ten-year lease. Luna: That's smart. A pop-up is basically a low-cost way to see if there's real demand. But I bet there's more to it than just renting a space for a weekend and hoping for the best. Lucas: Exactly. There's a whole playbook. And the numbers from their pilot are pretty revealing. They ran six weekends across two locations — one in a suburban strip mall, one in a downtown storefront that had been vacant for months. Total cost, including rent, staffing, marketing, and equipment rental, was about eighteen thousand dollars. Luna: That's not nothing, but compared to signing a lease and building out a full location — that can easily run a quarter million or more. Lucas: Right. And what they got for that eighteen grand was data. They tracked foot traffic, how many people actually walked in, and how many of those converted into signed membership commitments. The suburban location saw about four hundred visitors over six weekends, and they converted eight percent into paid commitments. The downtown spot? Two hundred fifty visitors, but a thirteen percent conversion rate. Luna: Interesting. So the downtown location had fewer looky-loos but more serious buyers. That's the kind of insight you can't get from a demographic report alone. Lucas: That's the key. They also collected zip codes from everyone who walked in, which let them map exactly where the demand was coming from. Turns out the suburban location was pulling people from a ten-mile radius, while the downtown one was drawing from a much tighter but denser area. That changed their whole site selection strategy. Luna: So what did they do with all that data? Did they actually sign a lease in the downtown spot? Lucas: They did — but they negotiated a clause that let them start with a shorter initial term and a lower base rent, because they had hard evidence of the conversion rate. The landlord was willing to flex, given that the space had been vacant. That's a huge win because it de-risks the whole expansion. Luna: I love that. And I'm guessing the pop-up also gave them a chance to test their operating model in a temporary space — like, what's the right staffing level, how does the class schedule work, that sort of thing. Lucas: Absolutely. They actually ran mini versions of their classes, and they learned that they needed two trainers on the floor during peak times, not one. The pop-up was a live experiment for staffing and scheduling. That's something you can't replicate with a paper exercise. Luna: So for any franchisee thinking about this, what's the first step? I assume you need to get your franchisor on board. Lucas: That's usually step one, and it's not always easy. Some franchisors have strict rules about brand standards and approved locations. But more and more are seeing the value in market testing, so they're becoming more flexible. The franchisee we talked to actually pitched it as a market research initiative, which helped get the corporate team on board. Luna: And what about the logistics? I imagine there are permits involved, insurance, maybe even health department stuff depending on the business. Lucas: Oh, for sure. For a fitness concept, you're dealing with liability waivers and possibly local business licenses. For food, it's health inspections and food handler permits. The franchisee said the biggest headache was navigating the permitting for the downtown location — it took three weeks just to get the temporary occupancy permit. That's a real cost in time and patience. Luna: So you need to build a buffer into your timeline. This isn't something you can decide to do and pull off in two weeks. Lucas: No, and that's a common mistake. People treat pop-ups like they're low-stakes, so they under-plan. But you're still representing the brand. A sloppy pop-up can do more harm than good. You need a clear objective — what are you trying to learn? What's the target conversion rate? What's your budget per lead? Luna: That's a good point. If you're not measuring, you're just guessing. Lucas: And the metrics really matter. For this fitness franchise, they calculated cost per lead at about thirty-five dollars, which was significantly lower than their typical paid acquisition cost of sixty to eighty dollars. That alone justified the pop-up experiment. They also tracked a metric they called 'intent to join' — people who gave their email and asked to be notified when the full location opened. That's a warm lead list you can nurture. Luna: So the pop-up isn't just a test — it's also a marketing engine. You're building a pipeline for the future location. Lucas: Exactly. And you can do that for a fraction of the cost of a traditional marketing campaign. They spent about three thousand dollars on local social media ads and flyers, and that drove most of the traffic. It was a very targeted spend. Luna: I'm also thinking about the lessons for other types of franchises. A food franchise using a pop-up to test a new menu item or a new neighborhood — that seems natural, right? Lucas: Absolutely. I've seen a coffee shop franchise do a pop-up in a corporate office building lobby for a week, just to see if the commuter rush was worth pursuing. They sold out every day and got a lease offer from the building owner. And a retail clothing franchise did a pop-up at a local farmers market to test the response to a new product line. There's a lot of flexibility. Luna: So the key is to think about what you're testing. It could be the market, the product mix, the pricing, even the store hours. The pop-up is a mini lab. Lucas: Right. And one thing I want to highlight is the importance of documenting everything. They took photos, tracked foot traffic with a simple clicker, and had a tablet for email sign-ups. That data becomes your evidence when you talk to the franchisor about expansion or when you negotiate with a landlord. It's hard to argue with a spreadsheet full of your own numbers. Luna: And it's also a way to build credibility with your franchisor. It shows you're not just chasing a hunch — you're making data-driven decisions. Lucas: That's exactly it. But let's not pretend this is easy. There are real risks. You're spending money that might not lead to a location. And there's the operational strain — they had to pull staff from their home location to work the pop-up, which meant some overtime and a bit of chaos on the home front. Luna: So it's not free. But the cost of a wrong location is way higher. I'd rather pay a few thousand to test than be stuck in a bad lease for five years. Lucas: Exactly. And that leads me to a point about the landlord relationship. When you do a pop-up, you're building a relationship with the landlord or the property manager. That can be a foot in the door for a future lease. They know you're a serious operator, and you know what it's like to operate in that space. It's a two-way vetting process. Luna: I hadn't thought of that. It's like a dating phase before the marriage of a long-term lease. Lucas: Ha, exactly. And like dating, you want to be honest about your intentions. If you're just there to test, say so. That way, the landlord isn't surprised when you don't sign the lease immediately. Luna: What about the opposite — you do a pop-up and it's a total success, but you can't get the space for a full lease. What then? Lucas: That's a real risk, especially in hot markets. The fitness franchise actually had that happen with the downtown spot. The pop-up was so successful that another business swooped in for the lease before they could finalize their agreement. They had to scramble to find an alternative. So you need to have a backup plan — maybe a nearby space, or a plan to extend the pop-up while you search. Luna: So it's not a silver bullet. But the data you gather might be transferable — you know the demand is there, you just need to find the right space. Lucas: Right. And ultimately, I think the biggest takeaway is that pop-ups are a strategic tool, not a gimmick. They let you make informed decisions with your eyes open. And in this environment — where every dollar of capex is being scrutinized — that's a huge advantage. Luna: Yeah, it really is. And I imagine this could work for existing franchisees looking to expand, as well as new franchisees who want to validate their territory before committing to a build-out. Lucas: Definitely. New franchisees can use a pop-up to test the waters in their territory even before they sign the franchise agreement. It's a way to de-risk the whole venture. Luna: Now, before we wrap up, I want to mention something that's been on my mind. We keep bringing up how pop-ups can be a low-cost way to test — and that's in the same spirit as the show itself. These conversations we have are a low-cost way to test new strategies and learn what works. And they're ad-free because of a small group of listeners who support us. Lucas: That's a good point. If you find these conversations useful, a couple of dollars a month genuinely makes a difference. It's what keeps us going without sponsors. You can do that at buy me a coffee dot com slash fexingo. It's a small thing, but it adds up. Luna: And we don't say that to pressure anyone. We know not everyone can, and that's fine. But for those who can, it helps us keep doing this. And speaking of testing new markets — I think the data from this episode is a perfect example of why you should test before you commit. Lucas: Absolutely. So, if you're a franchisee thinking about expansion, I'd say start small. Run a pop-up. Gather the numbers. And then make a decision based on something more solid than a gut feeling. Luna: That's a solid takeaway. And I'm curious — do you think we'll see more franchisors formally incorporating pop-ups into their expansion playbooks? Lucas: I think so. The ones that are forward-looking already are. It's a win-win. Franchisees get to test with minimal risk, and franchisors get to see which markets are worth supporting. I'd bet we'll see more pilot programs and even pop-up toolkits from corporate within a few years. Luna: That would be great. Until then, we'll have to do the legwork ourselves. But at least now we know the playbook. Lucas: And that's what we're here for. So next time you're scouting a new location, think about whether a pop-up could give you the answers you need before you sign on the dotted line.