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Sep, 12 2018

MULTI-UNIT FRANCHISING Can You Play the Game?

There’s no doubt a glamorous side to owning more than one franchise brand. But do you have it in you to take on the challenge? By Euan Fraser

MULTI-UNIT FRANCHISING Can You Play the Game?

Multi-unit franchising has a nice ring to it: owning a number of business units and running them like a corporate business, focused on long-term growth. In a multi-unit operation, franchisees work less in the daily operations of a single unit but focus on managing multiple locations at a higher level. But of course, it’s not easy. Here is my list of the top 10 things you need to think about before you consider going into multi-unit franchising, either as franchisee or franchisor:

When expanding into a multiunit franchise, the biggest change is from managing the processes of one unit to managing people to manage those processes. If your
management style is to micro-manage, you will have to start learning how to trust managers.

02 Getting a handle on HR:

As a multi-unit operator, you are expected to know everything about the business, so the type of support needed revolves more around managing a business from an HR perspective. This can be a challenge with a small head office team.

03 Challenges of operating more than a single brand:

Growing a business across multiple units in multiple locations is complex. If you add multiple brands, you are just adding to the complexity. Can you operate several brands without risking the quality of brand delivery?

04 There are benefits from the added financial support:

There are times when some units will do well while others may under-perform. The successful units can support the struggling ones, thus implying that you are reducing your risk.

05 You will have to get better at managing your cash flow:

Cash flow is more challenging with multi-units. Therefore, put in place a good cash flow forecasting process.

06 Staff incentives take on more importance:

Because multi-unit franchisees rely so much on experienced managers to oversee daily operations, you need to cultivate your managers by giving them the opportunities to obtain shares or promotion.

07 Stay focused:

You need to manage the performance across all units. Your business KPIs need to be your daily focus!

08 Keep thinking like an entrepreneur:

A multifranchise owner is entrepreneurial, energetic and hungry for growth. If you want to be an entrepreneur, this could be perfect for you.

09 Don’t grow before you are ready:

Multi-units must generate a sustainable momentum and culture, doing that means perfecting each unit before moving on to the next.

10 Assess yourself:

Multi-unit ownership takes an entirely different set of skills than being a single owner-operator. You will need to make a very honest personal assessment.

Summary

Multi-unit franchising is growing rapidly because it works for the franchisors as they deal with fewer franchisees. It works for franchisees too – if you understand what’s required and you are prepared for:

The Positives

>> You have been through it before and you are much more ready for most of the surprises with a new unit.
>> You have a much better feel for how to market and grow your business.
>> Economies of scale – i.e.marketing and stock purchasing – start to work in your favour.
>> Your training system is more focused and effective.
>> You are treated with more respect by the franchisor (more units, more revenue, more importance).
>> You have a much greater revenue (and hopefully profit) stream.

The Negatives

>> Cash flow can initially become a critical issue.
>> You no longer have the time to devote to any one unit – you must let control go to your managers.
>> Personnel issues and risks magnify.
>> Risk and reward comes into play more strongly. You have much more invested in the business and therefore have more money at risk. However, I hope that with that risk you can also reap the rewards of a larger and growing business.

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