22 minute read
special feature: are You ready to Be a multi-unit franchisee?
are you ready to be a multi-unit franchisee?
As confidence in franchising as a resilient and reliable business model grows, more and more growth-minded franchisees are thinking big and looking to expand their empire.
Multi-unit franchising offers a way for those with big business dreams to go from operating a single store or service to overseeing several units.
Some business investors want to focus on just one franchise; it’s their domain, their livelihood and their single focus. The business may be a family operation or passion project for a retired couple, or maybe it’s the bread and butter of a firsttime business owner who is dedicated to putting all their effort into growing that individual store or service.
For other investors, franchising is a way of building something bigger. Maybe they are highly experienced franchise owners who are ready to expand their footprint, or a business-savvy investor who sees the potential profit in operating multiple locations.
is multi-unit franchising a smart choice for your future?
The more franchises you operate, the more profit and money you can generate. But dedicating oneself to more than one unit takes time and money. Patience is key. It’s generally recommended for franchisees to become familiar with a franchise while waiting to turn a profit in order to gain back their initial investment. Then, once they have attained enough financial assets, they can feel confident in buying into another outlet of the same franchise. Using this model, the entrepreneurial franchisee can slowly but steadily grow a solid network, replicating the process with each outlet. While this is the safest way for cautious franchise operators to expand their network, there are more direct paths to franchise growth for those willing to take a few risks. prepared to multi-task the management of multiple units.
In addition to the tried-and-tested models of operating multiple units within the one franchise brand, another, slightly less common, option is for multi-unit investors to own different types of franchise brands. While single-brand, multi-unit franchising is still the standard method of operating a franchise network, running multiple stores across multiple brands can, cautiously, be done. Traditionally, franchise investment used to come with protected territory clauses, which prevented franchisees from investing in competitors within a certain distance, but some franchisors are starting to loosen their rules around exclusivity rights to adapt to this developing demand from entrepreneurial franchisees.
Which leads us to the most important attribute of a successful multi-unit franchisor:
Seeing the bigger picture
Instead of running the day-to-day operations of a single unit where you can hone-in on the specific needs of that one store or service, multi-unit franchisors need to take a broad view of operations across multiple locations or service providers. For entrepreneurs who enjoy strategizing, financial forecasting and envisioning business trends, managing multiple locations can be highly rewarding and potentially very lucrative. But these are skills and attributes that don’t come naturally to everyone, so be sure you have the right personality fit before making any key decisions. And, of course, you must be passionate about the brand as, in many ways, becoming a multi-unit franchisor makes you an ambassador for that brand. You must be highly focused on growing brand awareness and be invested in its success.
Multi-unit also means multi-tasking, so consider how you will juggle and prioritize the needs of each unit. How does one unit impact the other? How will you manage the staffing needs of each unit and the personal relationships with management and other staff members? The dynamics of being a hands-on sole franchise operator is very different to being an infrequent presence among several different units across a large territory.
So, before you begin down the path to multi-unit ownership, do your homework. This means being highly focused on:
the importance of due diligence
Before committing to an initial investment in multi-unit ownership, it is vital to dig deep into due diligence. Some franchises are more tailor-made for network growth than others. Some even offer discounts for secondary units and have operational systems purposely laid out for multi-unit franchising. So, if you have a long-term vision to operate more units, find out now if the franchise has growth potential. Even if there is a possibility to own multiple units, you need to know upfront what the franchisor’s financial expectations are. Some multi-unit focused franchises are only prepared to allow highly financed individuals to become multi-unit operators. Spend some time researching the expectations and requirements of the franchise, attend networking events and franchise expos, and speak to existing multi-unit franchisees to learn more about their experiences and the pros and cons they have encountered, and what support and training is offered. It’s important to be realistic about your goals, your abilities and your financial security. Success depends upon due diligence, so do your homework before committing to any big decisions. If you put the work in early, you will pave the best path – or multiple paths - forward.
To see what franchises are available, explore our Franchise Directory: https:// franchisingusamagazine.com/franchisedirectory
WHAt Are tHe BeneFitS oF MUltiUnit FrAncHiSinG?
To Franchisees
• Greater earning potential – the more franchises you own, the more money you can make
• Lower operational costs – franchisor may provide discounts for running secondary units, like lower fees and royalties
• Staffing flexibility – access to a larger pool of staff, making it easier to cover absences and manage leave requests
To Franchisors
• Less training required – only one initial training course required to manage several outlets
• Lower franchisee risk – granting additional units to a tried and tested franchisee means less risk than selecting a new franchisee to operate a location
• Faster growth – time-saved on recruitment and training allows business to get up-and-running faster leading to quicker growth and higher profits
Meet the Multi-unit Franchisors on a Mission to Grow service-based brands
Horse Power Brands, a trio of “blue-collar millionaires”, have teamed up on a mission to responsibly grow servicebased franchise brands.
Beards, flannel shirts and baseball caps are a common look for this lively downto-earth trio of Josh Skolnick, Zachery Beutler and Erik Van Horn. They not only have the business smarts and experience to grow and sell multi-million-dollar companies, but know their way around a farm and aren’t afraid to get their hands dirty. A rare mix today, they’re a breath of fresh air to the usual button-down shirt business executives.
Their first acquisition after forming Horse Power Brands is Mighty Dog Roofing - specializing in commercial and residential roofing, gutters, siding, windows, skylights and storm damage. Just six months into the investment, the company has awarded 40+ locations to its first 13 Mighty Dog Roofing franchisees across 10 states and is on track to sign a total of 80+ franchise locations by the end of the second quarter 2021
The Partners teamed up last year with a goal to improve the franchisor-franchisee experience and ROI in the service-based franchise sector. the industry’s next major service-based conglomerate with a clear differentiator – active involvement in the operations and franchisee support of its portfolio brands.
Horse Power is laser-focused on ROI by delivering systems, service and support, so franchisees can focus on sales and production to maximize monetization.
“The standard practice in our industry has become a race to 100 units sold, often without sensible offerings nor a clear vision to actually open all 100 locations. That’s not success. We are focused on providing atypical efforts and services to ensure we not only sell franchises responsibly, but open them with the tools to ensure the franchisees’ growth and longevity,” Skolnick said. “This is what sets us apart
and why we’ll become a portfolio of service brands with $1 billion+ in annual revenue.”
Sharing a goal to see franchisees open and grow successful businesses, Skolnick, Beutler and Van Horn said the formation of Horse Power Brands is the high point of their respective franchising careers. “After awarding franchises, we have the means and experience to actually get the locations open quickly,” Van Horn said. “Seeing the franchisees open successful is extremely gratifying. Each of us have had years of experience as franchisees, franchisors, developers and consultants. We are where private equity meets operational excellence.”
ABOUT ThE FOUnDERS WhO TEAmED UP TO DO IT DIFFEREnTlY In SERVIcE-BASED FRAnchISIng
Josh Skolnick
Josh Skolnick is a serial entrepreneur who began a successful landscaping business in his youth. In 2008, he founded monster Tree Service and grew it into a multi-million-dollar franchise with over 200 territories across the U.S. before selling it to Authority Brands in 2020. In 2018, Skolnick took over Redbox+, a patented combination portable toilet and dumpster rental service turning it into a nationally recognized brand with over 240 territories, but his drive didn’t stop there. On his most recent endeavour, Skolnick joined with two other franchising leaders to create the service-based parent company horse Power Brands, which acquired and operates mighty Dog Roofing. Skolnick lives in Pennsylvania with his wife, three children and dog Onyx, a Staffordshire Bull Terrier.
Zachery Beutler
Zachery Beutler began his career in franchising as a young, ambitious franchisee with nebraska-based complete nutrition, later becoming a multi-unit franchisee of color World housepainting, Inc. he went on to take up a variety of roles in franchise development with 5 different brands and as chief Development Officer of Redbox+. As one of the highest performers in franchise development, Beutler has gained a wealth of knowledge on building brands and businesses. he is also co-owner of Beutler Beef, a company that provides high quality beef, and most recently co-founded horse Power Brands. Beutler and his wife make their home in Pender, nebraska raising cattle on their family ranch alongside a beautiful daughter and two dogs, Winston and Jedi.
Erik Van Horn
Erik Van horn is a franchising and marketing mastermind who has experience franchising at every level including successful runs as a multiunit franchisee, master franchisee, area developer, franchisee consultant and franchise industry podcaster. he worked with liberty Tax Services, where he was a franchisee for six years and went on to be a master franchisee for another four. Van horn then opened Synergy homecare in 2011, Sola Salon Studios in 2012 and various other businesses garnering him more than 20 years of franchising experience. most recently, Van horn co-founded horse Bower Brands. Van horn and his wife live in Spearfish, South Dakota with their daughters and two dogs, Piper and Sparky.
multi-unit ownership presents attractive option for franchisees
rick Bisio
one of the primary considerations for someone who is researching a franchise opportunity is whether to own a single location or multiple units.
Multi-unit operations are a common practice in franchising, have many benefits and should be a key part of an individual’s due diligence process when exploring franchise ownership. According to a recent report by FRANdata, 54 percent of all franchises are multiunit operations, with 43,212 multi-unit operators controlling more than 223,213 franchised units in the United States. It is also a growing trend, as there was a 23 percent increase in entry-level multi-unit owners (2-5 units) during an eight-year span from 2010 to 2018.
The restaurant industry has the highest concentration of multi-unit franchise ownership. Almost every storefront franchise, whether it be a fitness concept, tax service, automotive or beauty-related business, has a large number of multiunit franchisees. Very few franchisors do not allow their franchisees to own several locations, while some, like major hair cutteries, expect their people to own multiple units. A similar situation also applies for serviced-based franchises without a storefront location. Instead of operating multiple stores, service-based franchisees own several territories in which they have exclusive rights to operate within a given geographical area(s). This grants them additional growth opportunities and is a common practice within franchising.
Benefits of Multi-Unit Franchise ownership
There are many advantages to owning more than one franchised establishment, whether it be additional revenue streams, lower operating costs, time commitment or staff flexibility. Opening the first franchise location is often the most difficult. There can be a steep learning curve as the franchisee learns the new system. It also requires the owner to be more hands-on in running the business and spend more time on-site. when a franchisee owns additional establishments. At that point, the franchisee can hire a manager and put a strong team in place to run all the locations while only needing to oversee operations from a big picture perspective. That can lead to fewer working hours, greater personal flexibility and a better work-life balance.
In addition to having another source of revenue, owning multiple franchised units provides franchisees with greater income diversification than managing just one location. It can sometimes mean a safer investment since they don’t need to depend on a single site to make all the revenue while also helping survive any difficult economic times.
There are also several operational benefits to owning multiple franchises. Whether someone owns two or five locations within a certain area, the marketing program will benefit every location and strategy becomes more efficient. If there is a situation in which a manager or employees are unable to work on a given day, other
staff members from different locations can be brought in to fill their void. The person who handles the business’ accounting and finances can take care of that across multiple units. There are tremendous economies of scale when it comes to opening multiple locations. To take advantage of many of these benefits that come from multi-unit ownership, it often makes the most sense to invest in multiple locations under a single brand. Franchisees are able to maximize their efficiencies while operating multiple units in the same system. Some owners chose to diversify their operations by owning franchises across several brands. As a franchise coach, I would recommend first opening several with one brand before buying additional locations with another brand.
the value of a Multi-Unit Franchisee
Successful multi-unit operators are very attractive in the eyes of franchisors. The franchisors invest a lot of time, money and support into a new franchisee as they teach them the system. This includes things such as helping them find the right location, negotiate their lease, hire and train staff, and market their business.
When a franchisee learns the system, much of that assistance from the franchisor is no longer necessary. Once a franchisee is proven and successful, that person becomes a great candidate to open more locations. There is less support needed from the franchisor and there is a higher potential for success.
Some franchisors actively seek candidates who have experience in owning multiple locations. In the restaurant industry, many franchisors will only accept franchisees with restaurant franchise experience who have operated a large number of units. I recently spoke with a group wanting to open a restaurant franchise who were basically turned down by the franchisor who was looking for people who had a track record of owning multiple locations and the money to do so.
Deciding on Multi-Unit Franchise ownership
The desire and comfort level to own multiple franchise locations varies for each person. Some people prefer to open a single location and grow from there while others want to start by signing a multi-unit deal. When I talk with people about this, I essentially ask them if owning one location will meet their needs.
People who do the proper due diligence should get a good idea of how much their earning potential will be from one location. If that meets what they are looking for in their lives, they should only sign up for that location. However, if one location is not enough, they should probably sign up for multiple locations and do that at the outset of the process. In some cases, the franchisor may discount the franchise fee for every additional unit or territory purchased by the franchisee. It also gives the franchisee exclusive access to a particular area and ensures they are not blocked by other owners if they wish to expand and grow their business. Multi-unit ownership is a popular and growing trend within franchising. If operated correctly, it can be a very profitable and successful form of business ownership.
Rick Bisio is one of the countries most respected franchise coaches and author of the Amazon best seller, The Educated Franchise - 3rd Edition. Since becoming a franchise coach in 2002, Bisio has assisted thousands of aspiring entrepreneurs nationwide explore the dream of business ownership. https://afranchisecoach.com/
launching franchise restaurants
in new marKets
there are many obvious to-dos for launching in a new market, however, franchise restaurants must also have plans in place for three priorities that are easy to overlook:
Having ‘boots on the ground’ to assist with training and ensuring brand standards, raising brand awareness, and assuring consistent supply chain services. 1 Boots on the Ground Some franchises appoint area developers to serve as an extension of the franchisor in growing markets. Goodcents, which is headquartered in De Soto, Kansas, just outside Kansas City, is currently expanding to new markets including St. Louis and Phoenix. We have ‘area representatives’ to develop those new markets, train new franchise owners, and serve as an ongoing resource for franchisees.
Area representatives are asked to invest in a defined geographic area that will be developed with a minimum of 10
restaurants – at least one of which must be owned by the area representative. An area representative receives half of the franchise fee for each location in their area. After a restaurant opens in their area, they receive more than a third of the royalties - or 2 percent of gross sales - from each location, for developing the area and supporting brand standards.
In this model, the area representative has a financial stake in the success of the new market. They are local owners working to develop a 10-store portfolio of which they can be proud.
2Building up the Brand Brand awareness is two-pronged for franchises. They must make sure consumers know about the business and its products or services, and they also have to make sure potential franchisees are aware of the opportunity that exists. In the Kansas City area, everybody knows Goodcents. The restaurant concept is part of the fabric of the community. It is where youth sports teams gather after a game, where office teams order lunch for meetings, and where you pick up a family meal for a busy weeknight dinner. But outside of the greater Kansas City area, Goodcents isn’t as well-known as some of its competitors. In addition to raising consumer awareness about the quality of the food, Goodcents had to raise awareness among prospective franchisees about what makes Goodcents a strong investment. To do that, Goodcents stepped up PR efforts and launched “brand awareness-building” ad campaigns in both St. Louis and Phoenix about the brand and the areas in development. Before you can begin to grant franchise licenses in a new market, you must make sure your potential candidates know who you are and what differentiates your brand from the competition.
3Distribution centers A restaurant franchise is only as good as its food, and food is only as good as its ingredients. That’s why Goodcents partnered with Sysco, a global leader in distributing food products to restaurants. Working with Goodcents’ partner in Kansas City, the franchise recently added Goodcents proprietary items – food, paper goods, cleaning supplies – to Sysco’s distribution center in St. Louis. So, if a St. Louis location unexpectedly runs out of ingredients, they can be at a distribution center to restock in 20 minutes rather than the four hours it would take to get to Kansas City. New Goodcents franchisees have many details to consider when opening their new locations, so sometimes it’s necessary to push some concerns to the back burner. However, having a local area representative in the market to support site selection, open the restaurant and train crew, as well as oversee branding and partner with an established distribution center, is key to success in a new market.
Farrellynn Wolf is CEO of Goodcents https://ownagoodcents.com/
slow and steady growth offers franchise success
Southern classic chicken, a family-owned fried chicken restaurant concept based in Shreveport, lA, recently launched a franchise program after 30 years in business.
The brand has learned many lessons, offering suggestions on the advantages of employing a slow and steady growth strategy utilizing the franchise model.
Often, we read about a unique, new concept that explodes on the scene and becomes a commodity in franchising. The idea seemingly sells out territory after territory with news of huge multiunit deals and promises of the arrival of hundreds of franchised units. But how many times do the same concepts see their development
plans fulfilled? Rarely. The driving factor behind this tendency is a flawed growth strategy that focuses more on franchise sales rather than the opening and support of successful franchise units. The resulting failures of going too fast are not only brand-damaging to the rest of the system but can, in some markets or cases, become fatal to the brand. Said another way, the race is won by those who approach franchising with a “slow and steady” mentality rather than a quick blitz off the franchise sales blocks.
Some common Mistakes Made by Franchisors Who Move Hastily
Moving quickly can come with a price. Fledgling franchisors who move too hastily become susceptible to common mistakes including the fear of saying “no,” the failure of performing due diligence, and overselling large territories to unqualified developers. It is crucial to understand that not every prospect is right for your concept, emphasizing the importance to be able to turn deals away. This can be for a variety of reasons from financial or operational qualifications to cultural fit. Failing to define and actively seek the characteristics desired in a franchisee candidate profile can lead to poor sales and tarnish a brand’s reputation. The majority of franchisees fail because they are either not properly capitalized or the franchise location should not have been accepted. A disciplined franchisor needs to undertake the necessary diligence to confirm the financial status of the prospect and do a real estate analysis of any market before opening it up for franchising. Steering the franchisee to profitable markets and sites that allow for optimal chances of success is necessary homework. Franchisors can often make the mistake of letting the excitement of selling territories consume them. Overselling large territories to unqualified developers, selling territories in “one-off” or distant markets where no brand name recognition exists, and failing to account for the time and expense of supporting these franchisees from afar can lead to failure. We encourage franchisors to employ a slow and steady growth strategy, beginning with entry into contiguous markets and then growing “inside-out.” This model has proven its ability to allow franchisees to not only sustain but exceed their growth goals, in addition to creating brand recognition over time.
Slow and Steady Growth can improve Brand name recognition
Franchisors desiring to be “best in class” will employ a growth strategy that makes such a desirable opportunity that only a limited number of applicants will be accepted. Generating this demand doesn’t happen overnight but, rather, through long periods of development. By creating a competitive franchise sales environment, the franchisor should attract better candidates. Reciprocally, sophisticated franchise prospects are typically more attracted to a franchise company that can showcase the value of its system through its long-established brand recognition, efficient unit-level operations, and compelling unit-level economics. All of these attributes are developed over time leading to a more attractive offering that draws in qualified applicants.
Pace Makes the race
There are many restaurant concepts that have come and gone; the operating history of the franchisor illustrates how consumers perceive and react to a brand. Longevity in the marketplace shows the ability to survive, thrive, and surpass any reasonable test of commercial viability, lending further credibility to the brand’s strength. Thus, the importance to deliver quality products at affordable prices in a safe and convenient environment is paramount. Adding to that is the ability to allow franchisees into the system and to provide them with the tools required for them to replicate the franchisor’s success. Southern Classic’s decadesold history of selling fried chicken and complimentary side offerings in its predominantly drive-thru model exemplifies how to achieve such success and do so in any economic environment.
Tom o’Keefe
the Slow and Steady Win the race
Ultimately, I implore you to demonstrate patient, focus, and discipline with your growth plans. Nurturing the confidence that you have in your concept will reflect your ability to succeed. While it may take time, and perhaps even more than originally thought, it’s the winning strategy. The side of the road is littered with those who moved too fast.
Tom O’Keefe is the Managing Director of Southern Classic Chicken, launching the 30-year-old family-owned brand to franchising. www.southernclassicchicken.com
