During this week’s Proven Match blog edition, we’re going to talk about franchise expansion. Specifically, the factors which need to be weighed prior to launching a multi-unit effort for your franchise. Thankfully, there is much already written about this topic, including hundreds of testimonials from franchise owners who have successfully replicated their operations into new markets—and flourished.
The attention given to the consideration of multi-unit franchise operations is one that includes a trending amount of growth, all within the past 10 years. According to industry analyst expert FranData, a key shift in ownership preferences has become very evident. Their research shows that multi-unit owners enjoy over half (53%) of all of the 450,000 franchises in the U.S. today. It seems like now, the rallying cry has become, “Go big or go home.”
In our research, one particular comment stands out when referring to multi-unit expansion. A very successful multi-unit franchisee stated that with each passing year, his brands are under strategic attack for market share, coupled with rising costs, all in a very competitive environment. His take is that there are two distinct directions—you can grow, or you can shrink. Since steady growth favors profit margins, he chooses to expand rather than contract.
When it comes to the timing of staging multi-unit growth, there was near unanimity in the agreement of having the right type of leadership in place to stimulate future development. Many that were polled about this factor were clear that building out first, rather than staffing up, didn’t make much sense. Their consensus was that key personnel were a crucial investment to oversee expansion efforts. And these folks needed to be ready to execute on day one. The importance of human capital should never be underestimated.
A franchisee poised for multi-unit success should be prepared for expansion only when their current operations are profitable and cost controls in check. A good measure of future success, according to those with a great track record of multi-unit expansion, advised that a franchisee’s current cash flow should be able to cover the added debt of taking on a new location or locations. It’s all about the smart delegation of management and growth.
Expanding from one franchise to multi-units is not necessarily designed to be an easy transition. But, nothing worthwhile ever is. While the stressors and time invested will undoubtedly rise, so, in turn, does the potential for greater income, growth and market share. Multi-unit franchising is definitely a long-term strategy and owners must be patient enough to see it through. Multi-unit operators need to be working from 3-5 year business plans, rather than 12-month spreadsheets.
A good way to keep a finger on the pulse of multi-unit ownership potential is both the specific industry news and an annual trade show you can’t afford to miss. Multi-Unit Franchisee is a key industry magazine, designed to keep readers up to date with all the latest news and information related to franchise growth. And if you’re truly serious about taking the proverbial leap of faith into multi-unit franchise growth, consider attending the 2017 Multi-Unit Franchising Conference. It’s set for April 23-26, 2017 at Caesar’s Palace Hotel & Casino in Las Vegas.
Another reason to go to Vegas? You’re welcome.
As a franchisor, you’ll want to know which existing and potential franchisee leaders best fit your business concept. Proven Match is the proven solution in determining those factors. Through our proven behavioral assessment techniques, predictive analysis becomes a predictive success for your franchise concept. If you’re ready to show your leadership by getting started, give us a call and we’ll put you on the path to a more productive year in 2016.