Multi-unit franchising
“There are significant operational benefits to expanding through a multi-unit operation… the franchisee is able to grow a sustainable, stable and ultimately profitable business”
Euan Fraser, franchise development
consultant with AMO Consulting, confirms: “When you get to three or more units everything changes – it’s not a case of just ‘working harder’. A multi-unit franchisee needs to operate differently. Accurate financial reporting, real-time trading data, performance management and staff engagement programmes become an essential part of the business. And, as their business grows, their transition from a hands-on to a hands-off manager will become even more critical. It takes a different mindset to be a multi-unit franchisee.” Certain franchisors – usually those
operating in consumer markets, such as retail, food and gym brands – are actively welcoming investors with multi-unit ambitions. Indeed, some brands are looking to attract potential multi-unit franchisees only. Franchises such as these, therefore, will have appropriate support available to its entire network of franchisees, whether they own multiple units or just the one. As a potential investor, you should carry out
just as much due diligence as you would with a single unit, if not more. Your business planning and preparation should reflect the scale of your ambitions. Euan says: “If a brand has both single- and multi-unit franchisees, they will need to tailor their support accordingly. It is vital that the franchisor is really clear about their expectations at the outset, but the initial business plan prepared by the incoming franchisee should have at least two years’ projections, so the planned growth is built in. The franchisor needs to have an idea of the available funds a new franchisee can access, as they will need more working capital if they are growing a business quickly.” Speaking of funds, banks and other
franchise-specialist lenders are seeing a rise in the number of applicants with ambitious expansion plans and are well prepared to advise and help this type of borrowing. Paul Hansen, head of sales and
marketing at Franchise Finance, says: “The multi-unit franchise strategy has been adopted by some of the most
successful and longstanding brands in the world, and there are significant operational benefits to franchisees wishing to expand through a multi-unit operation. Couple this with the benefits of being able to put in place a well- structured management and operational team possessing the correct skills and experience, the franchisee is able to grow a much more sustainable, stable and ultimately profitable business. “As part of our business planning process, during our initial conversation with any prospective clients we establish their key goals and ambitions. The increase we have seen in those that are looking to become multi-unit operators has been significant. It’s critical the franchisee makes correct and informed decisions at the start of their business journey, as this has a significant impact on the business planning process. Knowing their ambitions and growth plans at the outset ensures they are properly capitalised from the start and utilise the most appropriate and cost-effective funding to meet their business needs.”
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