MULTI-UNIT
NEED TO
KNOW
Buyer’s Guide
and infrastructure. And, of course, signing multi-unit or area development deals
also means dealing with fewer franchisees
to sell more units. Franchisees seeking a
new franchisor partner look for pretty
much the same: a solid management team,
strong unit economics, a well-known and
respected brand name, and an opportunity
to develop a territory over the long term.
Taken alone or together, there are
many reasons that inspire
successful multi-unit franchisees to seek out additional brands:
GEOGRAPHY.
growing profits without expanding the home
office staff. With a strong infrastructure in
place, a multi-brand franchisee has a builtin advantage in building brand awareness
in their territory and more easily, rapidly,
and successfully penetrating their market
with a new brand.
TRAINING AND RETENTION.
With two or more brands, a franchisee can
offer employees cross-training, flexibility,
“
sands of customer transactions. While the
operating systems differ and must remain
separate, sometimes elements of one can
be applied to another, or to internal operations at the franchisee’s home office. The
same holds true for marketing programs,
recruiting methods, training, HR, and every
other ingredient of franchising success. Keep
them separate to maintain compliance, but
look for areas to adapt good ideas across
Franchisors seeking new multi-unit partners are looking for a proven track record
managing multiple units, relevant industry experience, positive cash flow, strong unit
economics, and a solid management team and infrastructure.
Adding a new brand
can be the perfect path
to continued growth in
their region for a singlebrand multi-unit operator
or area developer who has built out their
territory, or for a franchisee of a brand
with no local opportunities to build more
units—without having to travel to new or
distant locales. Familiarity with the territory and the dynamics of their market,
combined with local connections and a
solid grasp of local real estate, developers,
and zoning requirements is a real homecourt advantage.
FINANCING. A successful track
record with one franchise concept demonstrates your ability to lenders who can
help you launch that next concept. Thriving
multi-unit franchise operators typically
have high net worth, extensive contacts,
and access to financing to open successful
units quickly. These are powerful assets to
have. Your existing operation and the value
of your real estate can help you acquire a
second or third concept, without putting
a stranglehold on your cash flow.
INFRASTRUCTURE. Multi-unit
franchisees with their own accounting, human resources, and other internal departments often have excess capacity. Adding
brands can take advantage of that capacity,
promotions, and a clear growth path as their
skill sets improve. This helps in attracting
and retaining top talent as you build your
organization, always a challenge in any business. And with better-trained employees,
unit economics improve.
ECONOMIES OF SCALE. Once
an organization attains a certain size, several
things get easier and, often, less expensive
since you’re “buying in bulk”: marketing
and advertising, supplier costs and services,
administrative and back-office functions,
and more. For example, one vendor may be
able to service all your equipment and, as
a result, offer you a more economical rate.
CO-BRANDING. Locating two or
more brands in a single location also allows
behind-the-scenes efficiencies that can boost
profits. Be careful to maintain compliance
with each franchise agreement, as some
concepts may not be combined legally or
functionally. If it does work, co-branding
and co-marketing can make more efficient
use of your advertising dollar.
SYNERGY. Each franchise brand
has its own proprietary operating system
perfected over many years and many thou-
”
your organization.
Multi-brand franchising is a complex
business. Done right, it offers great potential to the multi-unit franchisee seeking to
diversify their investment, increase their
profitability, and build a larger, stronger
organization. One caveat: New brands
should not (and in many franchise agreements, cannot) be in competition with your
existing brands. Check with your franchisor, franchise agreement, and franchise
attorney before you start shopping for a
new brand.
MULTI-UNIT BUYER’S GUIDE 2014
99