Thinking about expansion?
But how are your franchise support systems going to cope? And what do you want the group to look like in the future anyway?
One way or another you are going to have to bring in some help and, once you have established yourself and your franchisees are gaining business experience, allowing multi-unit franchise owners can become a very successful way to go.
Just make sure you understand the trickier bits around letting your franchisees loose in this way.
Single unit franchises keep everything in house
Do understand though, only allowing your franchisees to own and manage single units has many attractions too, and you do not need to go down the multi-unit path.
Single-unit franchising means all your franchisees will be working in their business to some extent and will give you the energy and focus for making each unit a success.
The disadvantage will be that you will need to expand your support team so they can travel increasing distances to service your increasing number of franchisees as they need. This can be costly and, as you try to service franchisees in Perth from your Brisbane support office, it can become unwieldy. Of course, there are ways around the problems. For instance, ERA expanded this way very successfully taking the pressure off the support office by buddying up new franchisees with good experienced franchisees when they started. Or you can always put in Master Franchises to manage some of the hassles for you.
But it is a slower approach and can become very costly.
Multi-unit franchise owners
Allowing your franchisees to become multi-unit franchise owners is becoming more and more popular though, and this approach has become an integral part of modern franchising in many parts of the world. Research in the United States shows more than 83 per cent of new restaurants in one fast-food chain were opened by existing franchisees who had the experience to do the job fast and with minimum support. Overall, research shows more than half the restaurant franchises in the United States currently encourage multi-unit franchising to promote rapid growth which is why US franchisees hold nearly five units each (on average). In Australia, Subway, Just Cuts and Mister Minute are just a few of the examples using this model.
As you put on your first five or six franchisees, you will find at least one will emerge as a shining light, running a business which follows brand rules and which is extraordinarily successful. Almost inevitably this person will feel as though they are part of your team and almost invariably, they will want to purchase a second outlet or join your support team or become a regional franchisor, even opening a new territory.
McDonald’s used to be wholly opposed to this approach, wanting their franchisees to own one outlet and work in it for much of the time. Today, I know a McDonald’s franchisee who owns every outlet along the Pacific Highway in New South Wales from Taree to beyond Grafton. This franchisee is only obliged to visit each store once a month.
The thing is, the McDonalds’ support and training system are so sophisticated, their outlets can run under delegated management successfully. And they draw on the experience of their franchisees to form formidable marketing and logistics teams.
That sophisticated level of support is key
To expand successfully beyond your first group of single-unit franchises, working out how to delegate much to franchisees and their staff in a way that does not put unsustainable stress on the franchise support office is the way to go.
And effective delegation just cannot take place unless you have tried and true systems and training which can be worked consistently across your whole group.
Not understanding that franchising is all about people continually improving support and training is the reason so many new franchises struggle to expand. The systems and training you put in place to start with will be good and will cover most of your technical, operational matters. But some of these procedures will not explain how a task is done enough. Some will have been left out altogether, some will become redundant, and some will just be too much and confuse. It is only as your support team works with your franchisees that you will hone your operations and training so that they become consistent and effective.
Your systems also need to grow beyond delivering your product or service
Inexperienced prospective business owners are attracted to franchised systems because they know they will have the business support to become successful. To begin with, you will be training your franchisees on how to deliver your service – the technical details of how to get the job done.
In time, however, as your franchisees get to know your product, you will find you need to help them become better business people. Better at marketing, better with managing the money and better at managing staff. This is because every franchisee has a growth cycle and will make the journey growing in business sophistication and the support you give them will need to change as they change, starting with technical details and moving on to how to become more successful at business.
John O’Brien once described the journey he took with Poolwerx as a franchisor in the early days when he found he had to largely replace his pool techy support team with business coaches once his first franchisees reached a certain level. Today’s franchise partner ranges from the first-time business owner right up to experienced entrepreneurs skipping the mobile van stage and going straight into owning multiple territories with multi-million dollar turnovers.
So, what are the pros?
Managed right, allowing carefully selected franchisees to move on to become multi-unit franchise owners gives your team a career path. John O’Brien today considers one of the great strengths of his group is the career he can build for his franchise partners from mobile van owner to multi-mobile van owner, to pool shop owner and then onto multi-franchise owner and manager.
Well established, successful franchisees often like to buy outlets which are not performing, giving everyone a win, win outcome. All those years ago, when I started as a franchisee with Bedshed in Perth, I was encouraged to do this and found a reasonably priced outlet I could build using the business skills I had developed. The outgoing franchisee I purchased from received something back for the time they put in, and the franchise group benefited because all the hassles associated with problem franchises were elegantly and somewhat avoided.
Good franchisees also recognise that, as they build their multi-unit numbers, they can reap the benefits of scale with marketing covering more than one area, lower purchase prices, the list goes on.
But there are cons
If things go wrong, they can go horribly wrong, so make sure you are selecting the right people to take this step with you.
Make sure your systems are well thought through. Understand the impact on your support office. Is there enough money in the pot to cover the extra layers of business management and support needed?
And finally, be very aware that franchise outlets managed by multi-unit franchisees will probably lose the added edge of being run by a hands-on single-unit business owner with skin in the game. Franchised outlets under management need to be carefully overseen to make sure they are making the revenue expected.
Make sure you are selecting only the best team players to take this step for you. Ensure they have the financial and people management skills to lead their group forward with success.
Be sure they:
- Fully understand how to delegate using your systems
- Can manage staff and their teams
- Are across the more sophisticated money management needed at this level
- Can handle the local area marketing
- Are fully behind you and the franchise group team
- Have the capital, personnel and family support to grow their businesses
- Understand how to lead and motivate their teams
So how to make sure you go along the right path
Never just expand without understanding what you want your franchisees to do in the longer term, the path they will take as they become more experienced, the changed support and training needs this will put on you as the franchisor.
Remember the controversial Donald Rumsfeld, ‘It’s what you don’t know you don’t know that’s critical!
So, listen to your franchisees and understand their needs, research your options, learn about the trickier bits around business growth and plan how you are to expand your franchise group, then confidently and elegantly grow into the future.
And welcome to the world of successful multi-unit franchising!