Preparing for Multi-Unit Franchise Ownership

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One of the roundtable discussions at the recent IFA convention was on the topic of “Going from a Single-Unit Developer to a Multi-Unit Developer.” While everyone at the table was a franchisor, there were some interesting things to take away that would be useful for a franchisee thinking of expanding into multi-unit ownership.

It shouldn’t be a surprise that single-unit owners would want to expand into multi-unit ownership: they understand the business model, there are built-in benefits to scale, and many franchisors are encouraging multi-unit ownership. According to information from FRANdata, since 2005, more than 50 percent of all franchised units have been operated by multi-unit operators.

IFA Convention 2011 - Multi-Unit OwnershipWith many franchisors updating their franchise agreements to incorporate multi-unit language, how does an existing single-unit owner make the jump? According to the executives, one big factor is motivation. If an owner isn’t properly prepared for expansion, there’s no benefit in pushing them. While many franchisors will develop programs to help standout employees move into regional management, some franchisors are finding it difficult to develop similar offering for owners.

A big take away from this portion of the session was that owners should make the effort to let their franchisors know that they want to grow, and that franchisors will be happy to help.

To be fair, there are significant differences once you go beyond owning one franchise, when the idea of being an owner-operator no longer exists. Now your daily efforts will be focused on administrative duties while properly delegating other tasks to your general managers. It’s this required change of mindset that was blamed for issues with becoming a multi-unit success.

If you’re ready to make the leap, the two questions are: How big and how fast?

The first step is going to be building a management team that can operate without direct supervision. The next move is to hammer out the details with real estate, construction, and any franchise financing needs that will be needed as you grow. You’ll quickly find that these large issues will consume more of your time than unit operations.

The great news is that for many franchisees, becoming a multi-unit owner is the path towards increased stability and continued financial growth.

Do you have any insight on growing into multi-unit ownership?

 

Photo credit to cobrasoft at http://www.sxc.hu/browse.phtml?f=view&id=990755