Creating a Culture That Supports Multi-Unit Franchises
Most franchisors have a vision of attracting multi-unit franchise owners to their system. The concept of strong franchise partners who bring capital, experience, ability and industry knowledge to the brand and with each deal open three or more locations is obviously appealing.
At Franchise Marketing Systems, we primarily support new and emerging franchisors who are just launching their brand and beginning to promote the offering, and so many entrepreneurs aim to recruit multi-unit franchise owners as their primary targets. The reality is that Multi-Unit franchisees are a hot commodity. This is a select group of people who have the capital, know-how and the entrepreneurial willingness to execute on a business model and take a franchise to market in multiple locations.
In many cases, these are investors who have done this before and successfully ramped up multi-unit franchise investments. So this makes the presentation for a new franchisor a bit difficult and in most cases kind of a long shot to sell to Multi-Unit Franchise owners. But that’s not always the case. RockBox Fitness, a new fitness brand has sold their first 30 units since launching the brand in early 2018 and the majority of these are multi-units with 2-4 locations each. Other new franchise brands have had similar results in other industries as well, Hummus Republic (24 Units), East of Chicago Pizza (76 Units) and Young Engineers (147 Units) are examples.
The key to effective Multi-Unit franchise development is to have a tight system and an excellent presentation that hits key value points relevant to these types of investors. This larger investor knows what questions to ask and they understand what pitfalls to look for in a franchise; if you aren’t able to address these satisfactorily, you will have a tough time getting Multi’s into your franchise.
What is your franchise marketing system, how do you get customers, what are the metrics for new client sales and how much validation do you have that this can be replicated? What is your core operating technology, what business functions does it cover, how easily can it scale and report? How has your staffing and recruitment model worked in the past, what types of employee traits and characterizes are you finding most relevant to the franchised business model and how will you support my recruitment? These are all examples of some of the questions a larger franchise investor will want answers to.
Recently, I had a meeting with a client in the medspa industry and one of our first candidates was a very large Pizza Hut Franchise owner with almost 50 stores. Her concerns with the new franchise were primarily centered around how much proof there was that the founder was able to replicate herself. The investor wanted to see that could the franchisor duplicate herself with employees and staff first before she would invest in the franchise platform. Her questions went a lot deeper and the financial analysis was specific, to the point and aggressive. It was an incredible learning experience for the new franchisor to be able to address these questions and overcome strong objections.
If your target is to focus on Multi-Unit franchisees, you need to define your franchise system in a way that allows them to scale the brand themselves. Keep in mind that a Multi-Unit Franchisee will not be working in the locations every day, so the profit per unit will effectively shrink with management. After Royalties, Marketing Fund and other franchise operations expenses, there needs to be enough “meat on the bone” for the investor to buy into your franchise in a big way. Systems, training and technology are also more critical to a Multi-Unit franchisee then they would be to an owner operator. Due to the scale of the business, they need to have the ability to manage the operations and get the information critical to their ability to operate more than one location. Many times, Multi’s will want to see that you as the Franchisor are operating multiple units so they can understand how effectively you have been doing this.
The upside to this approach to franchising is obvious. With the right franchise investors, your system expands, you get talented and incredible people into your brand and you scale with less partners in your franchise model. Multi-Unit Franchise buyers are in my opinion the best possible way to do franchising, but you need to have the right model and the right validation to make it happen.
Christopher Conner is the President of Franchise Marketing Systems and has spent the last decade in the franchise industry working with several hundred different franchise systems in management, franchise sales and franchise development work. His experience ranges across all fields of franchise expertise with a focus in franchise marketing and franchise sales but includes work in franchise strategic planning, franchise research and franchise operations consulting. For more information on how to choose the right food service franchise, contact Chris Conner at Chris.Conner@FMSFranchise.com