Multi-unit franchising: growing in the right direction

Franchisees can grow and build a cost-effective structure with savings and efficiencies, especially when it comes to staffing levels

There has been a significant increase in multi-unit franchisees, as the big name brands have grown their chains into global concerns, achieving strong brand recognition from consumers.

Many franchisors have realised that, if they want to attract ambitious franchisees who will grow and not get stuck in a comfort zone, they need to consider the growth potential of their territories.

Rapid expansion

Franchising enables a business to expand quickly, without the need for huge amounts of capital and brings benefits of scale across a range of costs. Similarly, multi-unit franchising enables the franchisee to grow and build a cost-effective structure with savings and efficiencies when it comes to things like staffing levels, for instance.

For the smaller franchisor, though, this growth in multi-unit franchisees can pose a different set of issues, not least the risk that a few larger franchisees can begin to exert stronger influence on the future direction of the franchise.

One of the keys to success in franchising, as for business in general, is to plan and control rather than allow things to drift. Moving from single-unit franchising to having a number of larger, more ambitious franchisees can be problematical for a franchisor if this growth is uncontrolled.

Franchisors need to consider a number of aspects as the franchise matures and franchisees grow. Will you allow them to buy additional territory/ies? How many is the maximum? For instance, you probably wouldn’t want a single franchisee to have 50 per cent of the brands’ outlets, as that could make the relationship hard to manage.

How can you help franchisees to manage the growth of their business? How do you ensure your recruitment process takes account of the differing ambitions of your prospective franchisees? How do you ensure you keep a step ahead in a fast-changing and developing business?

Franchisee journey

Revive! UK is a van-based franchise, but rather than set out to bring in single-van franchisees, the franchisor has always been open about its aim to bring in people who want to grow a multi-van business.

Territories are large to ensure franchisees have room to grow without having to buy additional area. But it takes more than that to ensure a van-based, hands-on franchisee takes the plunge into employing staff and taking on additional vehicles, which is a big step.

Having a structured ‘franchisee journey’ helps to support the growth process while allowing franchisees to develop at their own pace. Starting as a ‘Trainee’, Revive! franchisees move up to ‘Rookie’ status after three months, provided they have reached certain benchmarks in sales, business and technical skills.

The business development team support them through the next steps as they grow their customer base, develop their technical skills and reach the level where they are ready to employ.

At a certain turnover level and with three vans or more, franchisees move into the Revive! high performer group, which unlocks a different level of support aimed at taking their business even further.

This group of franchisees can take part in an accelerated business planning programme that involves a number of modules, including financial planning, benchmarking and building a business structure, and takes them through the preparation of a more detailed business plan.

At the end of the programme, they present their plan to the franchisor and their fellow high performing franchisees. It takes them outside their comfort zone as skilled technical operators and helps them make the change in mindset to becoming a business owner, not an operator.

Award winners

A great example of a multi-unit franchisee in the Revive! network is Nathan Holmes, who has grown his business from the one-van operation he started in Cambridge 12 years ago at the age of 24 to a £1 million-plus turnover business spanning three territories with 19 staff, a static site and 10 vans.

He brought in two business partners, Adam Holmes and Andy Blackhurst, which has enabled the growth to be controlled while avoiding the problems encountered if the span of control gets too large for a single individual to effectively manage.

Their success was recognised by the British Franchise Association and HSBC, which awarded Revive! East Anglia the Franchisee of the Year Award in 2016, beating major household name brands like McDonald’s and O2.

But the trio isn’t resting on their laurels - they’re planning to grow to £2m turnover and beyond.

Multi-unit franchising is here to stay, with examples throughout a wide range of franchises, not just fast food. It can take a franchised business to new levels and for franchisors makes for a more manageable network of fewer, but larger, franchisees to support.

Top tips

For the franchisee looking to become a multi-unit operator, these are some key areas to focus on:

• Work with your franchisor and take advantage of the support it offers.

• Be clear about your ambitions and look ahead as you grow your franchise.

• Control your costs, ensuring you understand the capital needs of the business as it grows, particularly the working capital requirements.

• Have good systems in place to monitor and control your units. You need to know how each one performs and where costs are incurred. If they’re not all profitable, you need to be able to take steps to improve things.

• Very importantly, bring in support staff at the right time - don’t try and do everything yourself.

Five important areas for a franchisor to focus on with multi-unit franchisees:

• Be clear about how you want franchisees to grow their businesses right from the outset.

• Recruit effectively and proactively, looking for those who demonstrate an ambition to grow and weeding out people looking to ‘buy a job’.

• Ensure the territory offers enough scope to grow - check that demographics and customer groups are readily available.

• Provide effective support at different levels as the franchisee’s business grows.

• Keep a step ahead, looking at what is happening in your industry sector and ensuring you’re offering the right levels of support.

The author

Cathryn Hayes is franchise director at Revive! Auto Innovations.