Is "Multi-Unit" the New Frontier for Australian Franchising?
For instance the Franchising Australia 2006 Survey conducted by Griffith University found that a third of franchisors had identified multi-unit franchising as a major growth strategy and concluded that "franchisors are moving beyond single franchise concept offerings in order to stimulate system expansion in a limited market". It also identified that two thirds of franchise systems in Australia have some multi-unit franchisees and that 15% of franchisees overall were multi-unit operators.
While this is less than in the USA it is substantial and is likely to increase, given that we do tend to follow many of their trends.
In the USA 20% of multi-unit franchisees account for half the franchised units
The growing incidence of multi- unit franchising in the USA prompted the International Franchise Association's Education Foundation to commission a study on the topic in 2002. The research, conducted by Dr Frank Wadsworth from Indiana University, found that while 20% of all franchisees were multi-unit owners, they accounted for more than half of all franchised units.
In response to this trend the Franchise Relationships Institute (FRI) recently sent its Senior Associate, Debb Lowe, to the USA on a study tour where she met with some of the USA's most successful multi-unit franchisees as well as a number of franchisors using the concept as a platform for growth.
She found this to be a vibrant and growing market sector with some franchisees operating over 100 units within the one franchise system.
Different skill sets and support systems needed
Debb Lowe says that a recurring theme from the people she interviewed was that franchisors and franchisees must commit to the infrastructure to support a multi-unit strategy before growth occurs.
"There is a different skill set for franchisees, for instance they need both high level operational, leadership and financial management capabilities, especially once they pass five units. Many franchisees said their biggest challenge was managing the people issues," Lowe says.
She also found that franchisors need to provide a different type of support with a greater emphasis on clear leadership on how the model should work.
"We need to be encouraging franchisors to ask themselves, not only are they ready, but are they open to learning how to do this properly because it actually needs a whole new way of thinking, not to mention planning, implementation, training and support."
Lowe believes that in Australia, multi-unit operators occur more by default rather than by planning and not enough time is being given to this model by Australian franchisors.
Why franchisors are attracted to this method of growth
FRI's Managing Director, Greg Nathan, says that research has found the primary reasons franchise systems adopt multi-unit franchising are to promote system growth, reward productive franchisees and achieve greater operating efficiencies. He believes that many Australian franchisors struggling to find new franchisees are now turning to multi-unit franchising as a quick fix for their growth challenges.
But he is concerned that while this will increasingly become a vital component of future growth plans, most franchisors in Australia are not yet equipped to manage this trend.
He says while multi-unit franchising is great in theory, like all great ideas success depends on good implementation. "A badly implemented multi-site program will do serious damage to a franchisor's brand and can mortally wound an otherwise good quality franchisee."
Visiting overseas experts to share their lessons for success
With this in mind FRI has invited to Australia several successful USA franchisors and multi-unit franchisees as well as a leading franchise consultant, Dr Dave Hood, to share their experience in a full day forum tided, 'Achieving Profitable Growth through Multi-Unit Franchising".
The forum, to be held on Monday 18 August, is aimed at Australian multi-unit franchisees who want to further improve their operations as well as franchisors who want to grow their franchise systems through this method.
The forum will also feature a number of successful local multi-unit franchisees in case studies, panels and facilitated discussions.
Nathan says these multi-unit franchisees will be asked to talk frankly about the nuts and bolts of how they run their multi-unit operations, and to share what they have learned along the way. They will also discuss what they believe franchisors could be doing more to help ensure this new growth opportunity fulfils its potential.
The forum will be followed by a special Masterclass for franchisors with Dr Dave Hood, President of the iFranchise Group, on the practicalities of setting up the processes and systems for success.
Debb Lowe, who has been helping to put together the Forum and Masterclass program based on the lessons she picked up in the USA says, "This is going to be a compelling day of practical learning from people who really know from their own experience what works and what doesn't."
For more information on the Forum or the Masterclass with Dr Dave Hood contact the Franchise Relationships Institute Franchise Council of Australia . 22.05.2008
FCA Member
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