May 2010 Franchising World

  When and how to determine if multi-unit franchising is for your brand. 
 

By Rocco Fiorentino, CFE
     
Sometimes it seems that the longest journey in building a brand is getting off the ground. Starting a new concept or planning to franchise an existing one requires a tremendous amount of hard work, a dedicated support staff, lots of capital, and a business model that works. The opportunity for multi-unit growth is certainly a great way to expand your system.  
  
The day we sign on the first franchisee is one of the most memorable days in the history of the company for both the franchisor and the first franchisee. 
  
As we develop our brand and fine tune our business model, our franchise community is growing and we are starting to see the light at the end of the tunnel, right?
  
Well, maybe this is really just the entrance way to yet… another tunnel and another journey.
  
As most of us would expect, “the journey of a thousand miles begins with a single step” according to Chinese philosopher Lao Tzu, so let’s start right. Be sure to have a firm foundation in the basics of 47% planning growth through multi-unit franchising. Be sure to think about all of the areas of your organization and how each of those areas would be affected by multi-unit growth. It is certainly exciting to offer multi-unit opportunities as they will bring in big franchise fees, and help provide that much-needed capital to grow.  
  
Proper planning goes a long way. Since many franchisors today are already offering multi-unit opportunities, we can certainly take a lesson or two from those who paved the way. Look at some of the other franchisors in your space and in your market to understand their offering and how your brand would be perceived in the eyes of the franchise candidate. 
  
Just a few years ago, for the first time in franchise history according to Darrell Johnson of FRANdata, more than 53 percent of all franchisees were operating more than one unit and many operating more than one brand. This is certainly a growing trend and we expect to see that number increase over the next several years.    
  
Preparing for multi-unit development in this economic climate requires thought and planning in several key areas.
  
Are you, as a franchisor, prepared to offer, award and support multi-unit operations?
  
Take the test 
First, we need to decide if our profile, selection process, and requirements will change from our existing criteria. Who is it that we are really looking for? There may already be some franchisees who are qualified to open additional units within our current franchise community. I always believe this is a great place to start since we are dealing with a known entity, a current franchisee. In order for this to be an effective way to spur multi-unit growth, the existing operations team should be involved in the selection process since they would know the strengths and weaknesses of the operators within the system. These operators are capable of developing additional units and would be a huge asset to the brand.   
  
There are, however, some franchisees who plan on becoming multi-unit operators from the start. Gary Robins of West Chester, Pa. is a multi-unit franchisee of SuperCuts Hair Salons. As a past multi-unit franchisee of Blockbuster Video, he knew from the start that his next opportunity must be a multi-unit opportunity. Robins considers himself a manager of people, not of a salon. With 34 units and growing, he has yet to pick up a pair of shears and actually cut hair. Robins will admit that financial performance in a brand is a must. For a franchisee, the initial investment versus the potential for return is critical in choosing a brand that is worth growing and investing in. 
  
So, as we gear up for multi-unit growth, it is extremely important to include all of   the team members in this process so that all departments can plan to expand in the same direction and at the same rate of speed. This will ensure a much lower risk of an accident and team buy-in as you forge ahead. For example, if the sales and development department is planning on adding 10 multi-unit franchisees this year and they are expected to build three units each over the next 24 to 36 months, the training and operations team must plan on supporting that goal. Additionally, real estate and construction support will be required to assist in meeting those development goals. If in-house support is not available, the process of outsourcing for those areas must begin. In an effort to support multi-unit franchisees, there should certainly be some thought in making accommodations for this new type of franchisee in how you select, train, and support them as they grow. This new type will need to focus on growth, and not on operating a single unit.
  
Are we prepared to make the financial investment required to move forward?
  
How do we know that our brand is right for multi-unit development?  
  
Review the following areas: Have you… 
   • Designed and shared strategic goals and growth plans with all team members,
   • Created a plan to finance the additional infrastructure required,
   • Decided on multi-unit, area development, master franchisee, or all,
   • Updated your profile and selection process,
   • Set up a sales team for success by providing a franchise recruitment plan, contacted management system, media placement, etc.,
   • Planned on being multi-unit franchisee friendly by providing a   network of lenders, landlords, and brokers and assistance in financing options,
   • Prepared all departments for multiunit growth,
   • Prepared to offer multi-unit agreements (fee discounts/territory), How many units, how much territory, over what time period?
   • Prepared to upgrade or develop franchise advisory counsel and advertising counsel committees to help build the franchise relationship and improve validation and communication, and
   • Considered the potential rewards and risks of offering multi-unit franchising, such as the reward of accelerated growth for the system and operating and marketing efficiencies versus loss of control in certain markets and dealing with larger stakeholders in the brand.  
  
One of the fastest-growing organizations in the industry, BrightStar Health Care is taking a positive step in welcoming multi-unit franchisees. The CEO and founder, Shelly Sun, CFE, has dedicated specific resources to develop a multi-unit boot camp and a multi-unit mentoring program specifically designed to meet the needs for personal development for this new-age franchisee. Sun believes that if you have a highly scalable model, then you can offer multi-unit opportunities from the beginning. You must be careful that you understand the investment range for multiple territories or units. For most concepts, unless you are prepared to invest in separate or additional support for multiunit operators, then it usually takes about four years to have enough support and have identified the right franchisees that have the appropriate capitalization, skills and attitude to expand.
  
Rocco Fiorentino, CFE, is president of Swiss Farm Stores. He can be reached at rocco@swissfarms.com   or 609-206-4300.