An insider’s guide to the ins and outs of multi-unit and multi-brand franchising, with valuable insight brought to you by the experts.
Interviews by Kieran McLoone, editor of Global Franchise
Multi-unit franchising can be a very exciting, lucrative business model for the right kind of investor, but in order to maximize your chances of success, you need to be aware of the challenges, benefits, and nuances involved.
To bring you a comprehensive guide to everything multi-unit, we spoke with a host of multi-unit operators, franchisors, and consultants about everything you need to know. The following are excerpts from these conversations, but to check out the complete package, head over to globalfranchisemagazine.com/podcast, where Multi-Unit Month episodes of the Global Franchise Podcast are released every Friday throughout May.
THE MAKINGS OF A MULTI-UNIT EXPERT
Therese Thilgen, co-founder and CEO, Franchise Update Media
GF: What kind of entrepreneur makes for a good multi-unit franchisee?
TT: There are several things. First off, financial capability is critical. Ensuring that the financing itself really supports the short and long-term goals of the business – especially important for those early start-up phases.
I would say that the character of the individual looking to become a multi-unit franchisee is also important; this individual has to have a lot of ambition and drive. They also need to have a love for people, because people are everything. The people are how this multi-unit franchisee is going to grow his or her organization.
GF: Do they need to have a deep background in franchising?
TT: We see lots of individuals come into franchising without any franchising experience. However, those that jump in right off the bat, knowing that they want to move toward a multi-unit growth strategy, can be trained by their franchisor.
To become a multi-unit franchisee, in essence, there needs to be a level of sophistication about business. To really be successful, they need to understand that there is always risk involved. This isn’t a slam dunk; there’s a lot of energy required, as well as people management and site selection.
“I think that if I were ever to get back into franchise ownership, I would never do it without knowing that there’d be an opportunity for expansion”
Farrah Rose, head of international development, The Franchising Centre
GF: How can franchisors assess whether they’re ready for multiunit growth?
FR: There are a lot of good multi-unit franchisees out in the marketplace, but it’s very important for a franchisor to look at whether they themselves are in a position to support a demanding, professional multi-unit franchisee in another market. Do they have a clear profile of who they’re looking for? Does the franchisee have enough business nous and know-how? Will they work alongside the brand?
The onus is on the franchisor to ensure they’re very clear not only about the market characteristics, but also the profile of the franchisee who’s going to represent their brand at a very large scale.
GF: On an international scale, where does multi-unit franchising not always work?
FR: Multi-unit franchising would work in most countries, apart from emerging markets where local franchisees aren’t familiar with the essence of franchising, and the relationships involved.
Some of those markets would potentially prefer to go down the single-unit route, to see whether the system works in the market. I think that when a franchisee is not fully aware of the mechanics of franchising, they may push the boundaries and think that they know better.
To some degree, that can cause quite a serious problem. For some of the emerging markets, franchisors would be well advised to trial with a single unit. If a franchisee meets the profile and works, they can give them the rights to open more units – they aren’t putting all their eggs in one basket.
HOW TO PREPARE
Scott Greenberg, business motivational speaker
GF: Should entrepreneurs plan for multiunit growth before buying a single unit?
SG: I think that if I were ever to get back into franchise ownership, I would never do it without knowing that there’d be an opportunity for expansion. Whether that means I build out more locations and territories, or acquire them from existing franchisees, that will depend on the circumstances. But for me, the beauty in franchising – the real opportunities – are in expansion.
I didn’t do that the first time; I didn’t have that kind of foresight. But in advising other people: absolutely, you want to make sure that there are opportunities to become multi-unit, should you make that choice.
“For me, the beauty in franchising – the real opportunities – are in expansion”
Anton Skarlatov, founding director, Fantastic Services
GF: How did you grow Fantastic Services to incorporate further brands/offerings?
AS: We started as a general cleaning company. Customers were happy with our services, so they’d then come to us for more things. Once we enter somebody’s home, we can then advertise the rest of our brands. We started with people asking us, but then we asked clients what else they needed. That way, we can offer services before our clients even begin thinking about them.
GF: How did you grow as a franchisor to support the network’s expansion?
AS: We saw franchisors were lacking in the ability to provide all of the tools that a successful business needs. They needed a marketing company that they could rely on, so we created a marketing branch of the organization. Then there’s technology. We needed to optimize our work in an efficient way. All of our services need to be accessible through people’s phones, so we built a platform that can access everything we offer.
There are over 100 services that we offer if we separate them into small groups. If somebody comes and starts with us, they will automatically become a multi-brand owner
Kevin Hein, co-chair franchise and licensing practice, Akerman
GF: What do entrepreneurs need to do before embarking on multi-brand ownership?
KH: If you come into the marketplace with aspirations to own multiple brands, the most important thing to do is to read the non-compete provisions in your franchise agreement and any other ancillary documents that the franchisor asks you to sign.
You need to have a really good understanding of what you can and can’t do under your contract. It is awfully difficult to go back to a franchisor after the fact and say: “I know I’m not supposed to do this, but can you give me permission to do it anyway?” Most franchisors will say no.
In this day and age, franchisors are much more amenable to franchisees operating multiple brands – provided they’re not direct competitors. So you can’t have two burger brands in your portfolio, but you could probably have burgers and Italian and Mexican without running afoul of most system requirements.
“If you come into the marketplace with aspirations to own multiple brands, the most important thing to do is to read the non-compete provisions in your franchise agreement”
Andy Johnson, multi-brand franchise owner, Neighborly
GF: Why did you opt to develop multiple brands, rather than growing through one concept?
AJ: I get asked that a lot, especially from corporate. To be honest with you, I have four young kids, aged nine, five, three, and two. I don’t want to travel – I want to stay at home and be with them.
Another reason is that Neighborly’s concept is to put a fence around the customer, and I want to do the same thing. I don’t like telling customers we can’t do something, and we kept getting calls for drywall repairs and things that a plumbing or appliance brand couldn’t provide. Now, we can do that. There’s nothing really that we can’t do.
GF: Have you had opportunities for cross-brand synergies?
AJ: There’s a ton of calls we get where the customer assumes the kitchen sink is backed up, or the dishwasher is messed up, but really it’s the other way round.
Technicians become friends across our brands, and they’ll call the office on behalf of the customer to take that responsibility off of them.
It’s all about that service and that experience. If I come to the customer and tell them it’s not our issue and they can call another company, then that’s not a good experience. But if I say it’s another issue and I can solve that for you, then it makes a great impression.
You’ve got to sell it to your technicians that you want to start other companies, not to make a whole bunch of money but to take care of the customer. That’s what they buy into: they can help the customer, no matter what the issue is.