The More The Merrier – Top Tips For Multi-Unit Expansion

Euan Fraser QFP gives his top 10 tips on what to consider before making the leap to multi-unit franchising

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 – there’s a lot of hard graft needed. Here is my list of the top 10 things you need to think about before you consider going into multi-unit franchising:

1. Handing over the reins

When expanding into a multi-unit franchise, the biggest change is from managing the processes of one unit to supervising people to manage those processes. If your style is to micromanage, you’ll have to start learning how to trust managers.

2. Getting a handle on HR

As a multi-unit operator, you are expected to know everything about the business and how it works, 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.

3. Should you operate more than one brand?

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

4. There are benefits from the added financial support

There are times when some units will do well, while others may underperform. One of the benefits of owning multiple units is that the successful ones can support the struggling ones, which means you are reducing your risk.

5. You will have to get better at managing your cashflow

Cashflow is more challenging with multiple units; vat and corporation tax are greater and can catch you off guard. Put in place a good cashflow forecasting process.

6. 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 own managers internally by giving them the opportunities to obtain shares or promotion.

7. Stay focused

You can’t just invest in multi-unit franchises but not manage the performance, as you could have done for a single-unit franchise. Your business units’ key performance indicators need to be your daily focus!

8. Keep thinking like an entrepreneur

A multi-franchise owner is somebody who is entrepreneurial, energetic and hungry for growth. If you want to be an entrepreneur, this business opportunity could be perfect for you.

9. Don’t grow before you’re ready

There’s no point in operating four average units that make only as much as two outstanding ones – you’re just creating headaches for yourself. Multi-units must generate a sustainable momentum and culture; doing that means perfecting each unit before moving on to the next.

10. Assess yourself

Some healthy self-analysis is going to help. Multi-unit ownership takes an entirely different set of skills than being a single owner-operator. You’ll need to make a very honest personal assessment before deciding whether it’s for you.

Summary

Multi-unit franchising is growing rapidly in the UK because it works for the franchisor as they deal with fewer franchisees. It works for franchisees, too, if you understand what’s required and you’re prepared for:

The positives

  • You’ve 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 (ie marketing and stock purchasing) start to work in your favour
  • Your training of new employees is more focused and effective
  • You have a much greater revenue (and hopefully profit) stream.

The negatives

  • Cashflow 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/reward comes into play more strongly; you now have a lot more invested in the business and therefore have more of your money at risk.

However, I hope that with that risk, you also can also reap the rewards of a larger and growing business.

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