Big business: multi-unit franchising

By Sarah Stowe | 06 Nov 2015 View comments

While one site or store is just enough for most franchisees in Australia, there are a number of benefits – both to the franchisee and franchisor – of extending your reach and growing your portfolio in a brand. Danielle Bowling reports.

Less is more. The old adage has a lot of truth to it – think makeup, wasabi or fake tan. But when it comes to business ownership, especially in the franchising world, sometimes more is more, with franchisees often given the opportunity to expand their footprint within a company much more easily than they’d be able to in a non-franchised business.

According to Pricewaterhouse Coopers‘ August 2011 Franchise Sector Indicator report, 11 percent of franchise units are owned by multi-unit operators. Professor Lorelle Frazer, centre director and lead researcher at Griffith University’s Asia-Pacific Centre for Franchising Excellence says that while Australia’s number of multi-unit operators is relatively small (in the US more than 50 percent of stores are owned by multi-unit franchisees), it is increasing and this is because franchisors are starting to recognise the value of expanding from the inside out.

“The major driver for them is the small pool of available franchisees when recruiting. Franchisors state that this factor is their greatest hindrance to growth – being able to attract enough suitable franchisees. So they have the opportunity for growth, just not the people and a good way to overcome it is to use your existing franchisees,” Frazer says.

She encourages potential franchisees to consider systems that have a number of multi-unit operators when they’re completing their due diligence, because “franchisees won’t continuously buy unit after unit unless they’re making money and doing well”. And those that are already in the franchising world and want to expand should first establish whether or not they are the right fit for that type of business ownership.

“They have to have the big picture mentality… Those franchisees that have the big picture mentality are able to transfer the skills they have into higher level management skills,” Frazer says.

Johnny Singh claiming his Franchisee of the Year award.

Support breeds success

Johnny Singh, multi-unit 7-Eleven franchisee at Turramurra, Manly, Chatswood, Mosman and Killara NSW, was recently recognised as the convenience franchise’s Franchisee of the Year, at this year’s 1st Choice National Conference.

Singh says the secret to succeeding as a multi-unit operator is having good family and staff support. That, and of course support from the franchisor – something that Singh is extremely appreciative of.

“7-Eleven offers a lot of support to multi-unit franchisees. It helps me to train my staff by giving me the correct training tools, and being a multi-site franchisee, I can check the daily sales and all the store reports from one single store. Multi-site franchisees are also given access to a district manager, and 7-Eleven holds meetings for us and regularly asks us about our problems and if it can assist in any way.”

Singh first became a franchisee in 2000 when he purchased a site in Blacktown and after seeing the positive effects that good customer service, a well stocked, clean store and upselling can have on sales, he quickly decided to expand, buying a Manly store in early 2001 and continuing to grow from there.

Singh concedes that multi-unit ownership isn’t for everyone and says people considering making the shift from one store to multiple stores should consider how their personal and work lives will be affected.

“Business changes a lot going from one store just to two stores. Getting honest and reliable staff is the key. I had to work long hours and find the correct staff who were hard working and honest at the same time and who I could delegate things to in my absence.

“Franchisees should consider their financial position. They should also consider staffing arrangements and how they are going to make a profit from their stores once they go from one store to two or three,” says Singh. “You should always be prepared to do that extra bit if you’re becoming a multi-store operator, and you have a lot more responsibility. You have your family and your business and at times it becomes hard to balance them. You consider your business before you plan your holiday.”

The beauty of big business

Nic Nayef, who owns 10 Hairhouse Warehouse stores in Victoria with his brother Emad, also understands the importance of good staff – it’s a big part of the reason why he continues to expand his business portfolio.

“A lot of our staff have been with us for up to 10 years and we’ve found that in order for us to grow we needed to help our staff to grow as well. A lot of the staff have become entrenched in our business, they’ve been pillars of our business. So in order to keep my staff in my business I’ve had to grow as well, so not only am I looking after my financial wellbeing and setting myself up, I’m also setting up my staff.

Emad and Nic Nayef (centre) at the 2011 Hairhouse Warehouse awards.

“You’re limited in terms of what you can do for your staff when you’ve only got one store. As you have two, three, four – well now I’ve got area managers, marketing managers, merchandisers, so you can create roles for your staff as you accumulate more stores,” says Nayef.

Starting work at Hairhouse Warehouse Knox City when he was at university, Nayef progressed to a marketing role soon after, before eventually buying Knox City with his brother in 2005, triggering years of franchise purchases, including two Lattouf stores, Hairhouse Warehouse’s sister hair and beauty franchise.

Today, Nayef spends his days managing systems and staff, but hasn’t lost sight of the importance of being in-store and being visible to his staff, all 150 of them, give or take.

“I tend to visit all the sites that I look after in a two day period, so I might see them two or three times a week. I’ll go from store to store making sure everything’s well merchandised, the staff are well presented, that the store is fully stocked. I don’t do any paperwork while I’m in the shop because I believe that from 9 to 5 or 9 to 6 we should be solely focused on the customer, nothing else. Don’t worry about putting away stock or invoicing and payroll or replying to emails, all that can be done after hours,” he says.

There isn’t a big difference between owning one store and multiple stores, Nayef adds, because at the end of the day it all comes down to having the right systems in place.

“A lot of the systems and things that we’ve implemented focus on ensuring our staff are always well presented, that our stock is always well presented and well merchandised. They help us stay ahead of our competition and make sure that we have the latest in beauty and hair care. And customer service – we put all our staff in the latest retail training, just to help develop them and educate them.”

While Nayef can understand franchisees’ desire to continuously expand once they’ve got their systems in place and can see the dollars rolling in, he warns them against doing so without seriously thinking about it first.

“You’ve got to be really careful because sometimes people say the more stores you have the more money you make, but that’s not always the case. We treat all our businesses very separately. All have separate bank accounts, because every single store has to run on its own feet … Unless you know that you can work each business really hard to get the maximum out of it I wouldn’t recommend it [expanding], because then what you’re doing is sacrificing sales at one store to bring out another store, then another store.”

The Domino Effect

At the ripe old age of 29, Nick Knight manages 16 Domino’s Pizza stores: seven in Sydney, five in regional NSW and four in the ACT.

While he agrees with Nayef and Singh that having the right systems and staff in place is essential, he believes any successful multi-unit franchisee needs to make sure they possess the right personal characteristics before making the plunge into multi-unit ownership.

Knight describes himself as a manager’s manager, and says multi-unit operators need to be the type of people that can hand over control and aren’t too territorial about their stores or how they’re operated on a day to day basis.

“You have to be someone who’s happy enough to relinquish control,” he says. “For instance, if a cool room breaks in one of my stores then there’s a process for my guys to go and get that fixed. I don’t need to know about it. I don’t need to organise it. And sometimes they get it wrong. Sometimes they call the wrong guy and it’s expensive but at that point in time my philosophy is that if you’re going to give someone a job, then you have to let them be able to do it and they’re going to get it wrong sometimes, but that’s when you need to have a sit down with them and say next time they can look at it differently.”

While accepting that a hands-on role in every aspect of the business is impossible for franchisees, Knight says that the other side of the coin is making sure you stay relevant and in the minds of your employees.

“I have to reinvent my role so I can still add value to the team members, and that’s constantly changing. When you have two stores, adding value might be popping in on a Friday night and helping the boys catch up, making some dough, washing up, trying to make the manager feel that he’s not alone. When you’ve got 16 sites, while you can still do that on occasion, you really can’t have that impact on all those 16 stores, so you need to change what happens when you walk through the front door and how the guys view you.”

Knight says a lot of his work now is number crunching and job performance reviews and while he’s got quite a full plate at the moment, further expansion could definitely be on the horizon.

“As long as we can continue to operate stores above the market and do a better job of it than the average, then we’ll continue to do it. As long as I’ve got people in the business who are looking for bigger and better roles and bigger and better challenges, then I’m happy to try and create those for them. It’s not really about the money. The money’s good and you have your good years and your bad years, but it’s more about the challenge. People always said ‘you can’t run 16 stores and do a great job of it’. Well that’s been done. What’s next?”