The Unique Challenges and Benefits of Multi-Unit Franchising
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Most first-time franchisees barely survive the ordeal of opening a single unit. Getting a business off the ground can gut bank accounts, spike stress levels and create 80-hour workweeks. So when Liz McGill began her franchise odyssey in 2010 by signing on for 10 Massachusetts territories of Get In Shape For Women, a small-group personal-training franchise, some people thought she was headed for catastrophe.
But unlike most newbies, McGill had spent the previous 14 years as vice president of human resources for one of the largest U.S. Supercuts franchisees, helping the operation expand from 19 snip shops to more than 75.
During that time, she'd observed the power of multi-unit franchising and soaked in the best practices that helped the company succeed. So when it came to starting her own mini-empire, she had realistic expectations. She knew she was going to work herself ragged, that there would be setbacks and that profit would not come quickly. But she also knew there would be a payoff if she had the energy and drive to make it work.
"First and foremost, to be a multi-unit franchisee, you need to be passionate about your business," says McGill, who has opened one and acquired four Get In Shape units so far and is gearing up to launch another five over the next few years. "You need to know your business from top to bottom, so when someone says, 'It can't be done' you can step in and show them how it can be done."
McGill is off to a good start, but not everyone has the advantage of years of experience on the front lines of multi-unit franchising. That's why we spoke with multi-unit franchisees across the country to get their hard-won advice on how to grow, manage and supercharge a franchise empire.
If you've set up one successful franchise, the idea of owning 10 or 20 might seem appealing. Just repeat what you did before, right? Not really. Multi-unit ownership takes an entirely different set of skills than does being a single owner-operator. Franchisees need to make a very honest personal assessment before deciding whether they can stomach delegating important duties to managers and other executives.
"I'm definitely still learning how to be a multi-unit guy," says Appleton, Wis.-based Tim Lamers, who jumped six months ago from two units to five: three Great American Cookies and two Pretzelmaker franchises. "Even at two stores you can keep your finger on the pulse. But at five stores, you're watching from afar. You can't see the details. What I'm learning is that the talents and skills that allowed me to be very successful with two stores are not the same that are going to allow me to be successful with five. I understand why so many multi-unit operators are religious--you have to have a lot of faith in this situation."
Auburn, Ala.-based Darrell Lamb, who along with a partner owns 28 Express Oil Change and Service Centers, cautions that stepping up to multi-unit ownership means things will likely get worse before they get better.
"You have to understand that multi-unit ownership is for the long term," he says. "It's not going to impact your life in a positive way for the next year. You will take one step back financially and in terms of time before you take three steps forward in the following three years."
Assess Your Franchisor
Marc Kiekenapp, founder of Kiekenapp & Associates Consulting, a franchise consulting firm, suggests seeking out a franchisor that understands and supports multi-unit owners.
"You should look for franchises that have discounts and accommodations for people buying multiple units. They should have systems in place that support multi-unit owners, like POS systems that talk to each other," he says. "Lots of fees are set up for single-unit owners. If the franchisor charges a $1,000 technology fee, should you really pay $3,000 if you own three units? Ask about discounts on franchise fees and royalties. And look for additional training for your staff. Sometimes the franchisor limits training to one or two people. Make sure they will accommodate enough people for all your units."
Lamb says most franchisors don't cater to multi-unit operators--and that's fine by him. Instead, he suggests finding a support group of other multi-unit owners to get advice and ideas. "Most franchisors assume that a store is going to operate better with an owner-operator there every day," he says. "It's not the goal of most franchisors to have mammoth franchisees--I think they find it easier when franchisees have one or two stores."
That means multi-unit franchisees need to be self-reliant and find many resources on their own. "For the most part, I don't think franchisors are training us to be multi-unit owners," says Cedar Park, Texas-based Sean Falk, chair of the 2013 Multi-Unit Franchising Conference and owner of 12 units, including Great American Cookies, Pretzelmaker, Mrs. Fields and Salsarita's Fresh Cantina. "They train us to run a store. They're not thinking about multiple units; they're leaving it up to us. That's why there's a strong need for mentorship and outreach to other owners. It's valuable to go to conferences and events to find vendors who cater to multi-unit ownership and people you can network with."
At the same time, multi-unit owners need to communicate their needs to the franchisor, and ask for special treatment if they think it's warranted. "The key thing I learned from Supercuts is that you have to partner with the corporate team and work in a collaborative way," Get In Shape's McGill says. "You have to advocate for yourself, but you have to do that in the right way and in a respectful way. One of the things I do is align myself with winners. I look at all the top-performing locations in the system and learn what they are doing that makes them so successful. Then I replicate those things in my organization."
Find a Support System
Even though Lamers has been in franchising for only five years, the brands he owns have been sold to three different franchisors. To him, this drove home the importance of his community of fellow franchisees, upon whom he relies for advice and support. "Looking at the franchising world, don't put the emphasis on who the franchisor is," he says. "It's more important who the franchisees are and if they're in it for the long haul. The influence they have on the brand is much more important than the franchisor."
For Lamb, talking with other business owners through an accountability group has proved invaluable for figuring out where he is excelling and where his management style is coming up short. "When I meet with my group, the comment is always, 'Dammit, Darrell, you keep talking about having no time, because you can't delegate.' And they're right," he says. "They help me work on that issue. I encourage a multi-unit owner to find support and education everywhere they can. Find a mentor to talk to on at least a weekly basis to voice your frustration and get advice."
Build a Strong Team
Speaking of delegating: It can be the most important--and for most people the hardest--aspect of multi-unit ownership. What that means is building strong teams within each unit and establishing an effective layer of management to handle overarching operations.
For McGill, the No. 1 priority in opening new units is recruiting top talent.
"I do probably four or five interviews a week," she says. "Even if I don't have a current opportunity, I put the people with tremendous 'wow' factor in my back pocket. When opportunities open up, I can plug them right in.
"What I learned in a very short period is that 'good' employees will put me out of business," she adds. "If they are good and just do their job, I will fail. I need people who share my passion for the business, and make it fun. You have to have superstars everywhere. You have to teach managers to improve B players or get them out of the organization."
Lamb of Express Oil Change and Service Centers agrees. "People are the most important thing," he says. "You can't start opening stores without people. You need to start building a bench of potential managers within each store, people who can take over the next store you build or step into a manager spot. Bench-building costs money, but you have to have a team in place to maintain what you've got, and so people can move forward."
At some point, most multi-unit franchisees start to build a management team. Falk says the size and makeup of that team should depend on the type of franchises you run; a cookie shop, for example, will have different needs than a hotel. "For me, an operations manager, bookkeeper, marketing person and someone to take care of administrative support are important," he says. "It really depends what you're strong at. If you're good at marketing, don't farm it out. Keep that for yourself."
McGill knows she will eventually need a management team, but at five units, she's not ready to start recruiting just yet. "When exactly to add that layer of oversight and overhead is a great question. I believe it's important to stay lean until I'm close to capacity and my ability to successfully lead, engage and coach my teams is diminished," she says. "I'm utilizing the top talent in my organization to coach, train and model operational excellence for all new employees. I can transition that leadership talent from operations to overhead over time. It also enables me to assess whether they truly share my vision and passion for the business."
Don't Expand Too Quickly
One of the primary benefits of multi-unit franchise ownership is economies of scale. But that can work in the opposite direction as well: What's the point of operating four mediocre units that make only as much money as two outstanding ones?
Multi-unit businesses need to operate at a high level, not only to overcome the lack of an owner-operator, but to generate a sustainable momentum and culture. Doing that means perfecting each unit before moving on to the next, something Lamers has been dealing with as part of his recent growth.
"I started off with one mission, and that was no broken stores," he says. "Right now three out of my five stores are broken. I have to focus on getting them fixed and running the way they should be. Until then, I won't have any additional growth."
Two of McGill's Get In Shape units are among the system's top 10 performers. She hopes to get her other three close to that level before putting her energy into new locations. "You have to create an environment where your employees love what they do and love coming to work--a place where clients cannot wait to visit," she says. "To be a multi-unit franchisee, you have to master how to over-deliver and create an experience where clients won't even think of going elsewhere."