We all get into business to build wealth. To achieve an attractive return on investment, we must grow sales. However, one location’s organic growth (more customers, buying more frequently at a higher average transaction value) may not yield the profits we seek. Some franchises work best with multi-unit ownership.
This is the second of a 5-part series that explores my “top 5” list of capabilities that make multi-unit ownership work. Spoiler alert: it has little to do with how well franchisees make sandwiches, scoop poop or cut hair. Even the best “operators” will fail at multi-unit ownership without an enterprise management mindset – a mindset that exists for both the franchisor and the franchisee.
Multi-unit success depends on these five capabilities:
- Maintaining Scalable Systems (delivered by the franchisor, executed by the franchisee)
- Screening, Training and Coaching (both franchisor and franchisee)
- Leading, not Doing (managing the enterprise)
- Understanding Financial Drivers and Results (monitoring the enterprise)
- Managing the Financial Risks and Rewards (planning the growth pathway)
#2. Screening, Training and Coaching
In the rush to grow, franchisors may not carefully screen prospective franchise candidates, or may offer multiple units to the wrong person. Franchisees building an enterprise have the same tendencies, especially in today’s difficult labor market. Effective screening (meeting defined criteria) and onboarding (training, shadowing, and mentoring) are essential.
Preparing to own a first location is very different from preparing for your second, third or fourth location. The successful franchisor recognizes this and has specific training for management and leadership skills for enterprise managers.
Finally, engagement with franchise business consultants who support and coach franchisees is critically important. This requires both the franchisor and franchisee to invest time and effort. Franchise systems lacking field teams with consulting and coaching skills risk letting franchisee problems snowball. Similarly, franchisees must coach their management teams. Successful enterprise managers and successful multi-unit franchise models embrace a strong coaching culture.
Watch for more details on the other capabilities #’s 3 through 5 in the coming days!
ICFE Special Session on Successful Multi-Unit Expansion
My colleagues and I will be presenting a full day session entitled: Advanced Financial Essentials: Driving Profitable Growth Through Multi-Unit Expansion at the Institute of Certified Franchise Executives special sessions on Saturday, February 8th at the IFA conference in Orlando. If you are seeking to expand your network through multi-unit ownership, I encourage you to join us!
Follow this link for more details and registration options: