How to Bust the Four Great Myths of Multi-Unit Franchising
This is the fourth and final article of a series sharing some key learning from our upcoming ICFE session, “Profitable Growth through Multi-Unit Expansion“. Click here to get the prior article.
In earlier articles from this series, we outlined how to establish a long-term vision for building the value of franchise investments. Next, we used Breakeven Plus to gain an intuitive understanding of the relationships between costs, volume and profits. These collective insights formed the basis for four plans: a sales plan, a profit plan, a cash flow plan and a financing plan.
This planning is essential to profitable multi-unit growth. While it is important to have a solid vision and financial plan for achieving it, successful single-unit operators fail as multi-unit investors for reasons that are not necessarily financial. Let’s clear the air from the start by reviewing and busting four great myths of multi-unit franchising.
Myth #1: The Hardest Part is Getting the Financing
Clearly, you need a business plan that demonstrates where the money will come from and how it will be paid back. It’s your roadmap to building business value. This includes a source of cash flow (cash reserves or a credit line) dedicated for the new location. Many expansions have failed because owners robbed the cash flow and financial capacity from their first unit to support the second. Getting the necessary financing is essential but is not necessarily difficult. Especially if you have a track record of profitability from unit #1 and a solid business plan for units 2+. Getting the financing is not the hard part. Giving up control of operations is. And it’s a necessary step in enterprise development. Micro-managing operations of multiple locations doesn’t work, no matter how much financing you have.
Myth #2: Great Operators Will Make Great Multi-Unit Owners
Some people are just great operators. They run a tight ship, pay attention to detail and submit information and respond to requests on time. They embrace the ops manual and know exactly what it takes to run a great operation. These habits check most of the boxes on a franchisor’s checklists of criteria for expansion. Yet many great operators struggle to be great multi-unit owners. Why? Because to successfully manage multiple locations one must let go of day-to-day operations. For some this means relinquishing control of the things they like best and trusting others who are not as good at it.
Myth #3: Multi-Unit Franchisees Must Work Harder than Single-Unit Owners
The multi-unit owner’s most important tasks are to select, place, nurture and support their operations teams. And, of course, to ensure the franchise recipe is followed. If it is a good model with good systems for monitoring KPIs, this approach works. No longer is the owner tempted to work into the wee hours of the night to make operational deadlines, because it’s not their job. Instead, they rely on their mastery of KPIs and communication skills to build a strong team. They define expectations through written, measurable goals. They establish effective meeting agendas and a cadence to monitor results and coach up performance. No more spinning plates, being busy just being busy. Work-life balance is now within reach.
Myth #4: It Takes Less Franchisor Resources to Support a Multi-Unit Six-Pack than Six Single-Unit Owners
Multi-unit owners are not buying a job, they are investing in a portfolio. And for that they expect to earn impressive returns on their investments. They likely have good business savvy and they expect the franchise model to work for them. They typically rely heavily on franchise resources (including support teams) to train and support their operations staff. Support teams work with non-owner location managers who are not “invested” and may not be as motivated as single-unit owners doing the same job. And non-owner managers leave. Turnover in operational management requires additional training and support that would not be needed in an owner-operated location. These factors can cause multi-unit operations to rely more heavily on franchise support than single-unit, owner-operated locations.
While we’ve dispelled four myths, one great truth survives: multi-unit expansion is a “no-brainer” when the franchise model and the franchisee possess the competencies, capacity and capital to replicate scalable operations, build strong teams and manage remotely.
What are 3C’s2?
Competencies, Capacity and Capital for Zee and Zor!
Multi-unit owners require competencies, capacity and capital that differ from single-unit operators, and the most successful franchisors consider these needs in establishing how they will support multi-unit growth in their franchise system.
How Can Franchisors Help?
Franchise professionals attending our workshop (see below) will explore the competencies, capacity and capital requirements to ensure profitable growth through multi-unit expansion. To identify whether your franchise system mastering the three C’s, take the 3C’s2 Self-Assessment.
If your score is less than 100%, you should attend the workshop!
Driving Profitable Growth Through Multi-Unit Expansion | Saturday, February 26, 2022
This pre-IFA conference workshop is hosted by the Institute of Certified Franchise Executives (ICFE). Attendees earn 200 CFE Education Credits. Learn more about the session, including registration details here.