At Pack & Send, chief executive Michael Paul believes multi-unit franchising has contributed to the expansion of the retail network. It has also reduced costs associated with franchise recruitment, reduced compliance, uniformity and support costs, as well as reducing the risk of recruiting a new franchisee.
“The capabilities of an existing Pack & Send franchisee are well known to us, which certainly plays a major role in multi-store ownership,” Paul says.
Sergio Alderuccio, FC Business Solutions general manager franchise services, found that the level of support did not alter for franchisees once they became multi-unit franchisees.
“The focus of the Quest Serviced Apartments support team is on the individual property and its performance, as opposed to the individual franchisee,” he says. “However, the reality is that multi-unit franchisees seek a different focus and attention by virtue of the fact that they have a bigger investment in the brand.”
At Barry Plant all franchisees are treated the same, says managing director, Mike McCarthy, but the relationships with multi-unit franchisees tend to differ because of their experience in the business. He believes that multi-unit franchisees are operationally strong and are more focused on key business elements, such as strategy, local area marketing and motivating their people.
“The success of a multi-unit franchisee is their ability to develop, motivate and retain experienced, long-term, loyal staff,” McCarthy says.
Michael Rose, development director at Crust Gourmet Group, confirms relationships with multi-unit franchisees are “essentially the same”, however, he believes that circumstances change when franchisees became owners of three or more stores.
“Franchisees with three or more stores need to ensure they maintain and continue to develop their systems and processes, as opposed to single-mindedly focusing on business growth,” Rose advises.
ItÕs a view Michael Paul agrees with, saying that multi-unit franchisees require different advice and guidance, such as taking a more strategic focus, rather than an operational one.
“They need to be stronger in areas including financial disciplines and human resource management, such as staff recruitment and management development,” he suggests.
Michael Paul advises caution over the initial step to becoming a multi-unit franchisee, believing it wise that a second unit is granted only when the franchisee has proven themselves with a single unit over a period of time.
“It is very important to have a thorough selection process in place for each additional franchise licence granted in order to protect the interests of the brand, the franchise system and the interests of the franchisee,” Paul says.
“This includes the submission of a business plan that addresses the issues of the proposed management structure of the new outlet and a detailed financial plan.
“The franchisor management team and the Board of Directors should approve the franchisees application for an additional store. Essentially, we seek to thoroughly understand whether the franchisee is ready to expand.
“That is, do they have the financial and human resources and the skills to drive profitable growth through a multi-store enterprise — or alternatively, can the franchise best maximise their profits by focusing efforts on their existing store or stores?” Paul asks.
For Alderuccio the key message is that multi-unit franchising cannot be achieved without a strategy. As Peter Fiasco highlights, without a strategy, mistakes can be difficult and very costly to correct. A multi-unit strategy needs to address some key fundamentals, such as a proven performance from your existing outlet, including the quality of your team, management ability, delegation strength, the potential impact on your existing businesses, percentage of market penetration, proposed management structure, local marketing skills and business and financial planning.
Alderuccio strongly believes that it is essential that both the franchisor and the franchisee work to a comprehensive multi-unit strategy.
“The franchisor’s strategy must be built on a robust franchise system that already has successful and satisfied franchisees.
“I wouldn’t think that there would be an instance where a franchisor would begin with a multi-unit franchising plan. The successful franchisors have evolved into the strategy from having built successful single unit franchise systems first and foremost.
“It would be unlikely for the franchisee to be successful without careful planning from the franchisor, especially in the key area of the franchisee’s past performance.
“The franchisors with a successful multi-unit franchising strategy are prepared to reject an application for an additional franchise, especially if they are of the opinion that a franchisee will achieve more from remaining a single franchise.
“The less mature and more opportunistic franchisors do not generally display the same discipline and commitment to strategy. If franchisees get out of their depth, the franchise system, the brand and the franchisee’s investment can all be damaged, and possibly be put at risk.
“The business leadership must come from the franchisor.”