It’s no small achievement to open a single franchise unit and make it successful. But opening more than one is a higher-stakes gamble that can pay off with bigger profits. Done badly though, more units may just lead to bigger losses.
Owning many units takes a completely different set of skills than owning a single store, says Mark Johnson, CEO of the consulting firm MyFranchisePath.com. Are you cut out to be a multi-unit franchisee, or would you be happier with a single store? Below, our experts offer some tips on how to tell.
Take It Slow
Few would-be franchisees should jump right into multi-unit ownership, says Don Daszkowski, president and CEO of franchising resource FranchiseBuyersNetwork.com. The exception is people with previous experience managing a multi-unit operation, for example, your parents’ small restaurant chain.
Otherwise, he says, open one store and see if it’s profitable. Then, see if it pencils out as part of a multi-unit chain. Daszkowski says that often franchisees don’t count the true costs of running a unit without an owner/manager on the premises, as you’ll need to if you expand. If it takes two managers at R200 000 a year to cover the long hours you’ve been putting in at that first store, that makes a serious dent in the profit margin.
Also, work on developing a good relationship with the franchisor. If you don’t feel supported by them with one unit, you won’t want to open multiple units.
Do What You Love
The move to a multi-unit operation signals a big change in how an owner spends his or her time. Instead of spending all day at the store, serving customers and overseeing employees, the multi-unit operator concentrates on hiring and training quality managers to oversee each unit.
“A multi-unit owner must be a delegator who’s willing to rely on good people,” says Johnson. “You need to be more of a coach, a leader with drive and vision.”
Would you enjoy mentoring workers, or would you miss the day-to-day contact with customers if you expanded? Can you let go of store-level responsibilities and empower others to make those decisions? You’ll need to if you’re going to succeed with multiple units.
Two other important skills in the multi-unit operator’s toolkit are site selection and fundraising, says Michael Seid, managing director of franchise consulting firm Michael H Seid & Associates. With multiple units, it’s a plus if you have expertise in those areas, as you’ll be out looking for sites and raising money often.
Map Your Strategy
Where you open, your additional units can help or hurt you. Ideally, you want your units to be near each other, but not so close that they depress each others’ sales, says Seid. Having all your units in one territory has numerous benefits: you can often save money doing joint advertising, it’s convenient for you to visit all the units regularly, and it’s easier to move employees between stores, promoting assistant managers or solving personality clashes.
Some operators sign up to be area developers, thereby guaranteeing adjacent markets will be available for additional stores. On the downside, examine whether operating more units would really be more profitable than operating one, Seid notes. Will you add more overhead such as a warehouse or a delivery fleet? Be sure to consider the costs of growth.
Franchisees seeking to expand should first learn how much assistance they can get from their franchisor. There should be substantial support, as franchisors save an estimated R20 000 to R30 000 for each franchisee they don’t have to recruit, notes Seid. So be sure to ask about franchise-fee discounts and any other available perks.
Show Me The Money
Financing one new store poses a challenge. Financing many, especially many that are opening at once, is vastly more difficult, especially in the current economic downturn. It’s generally a myth that one successful unit will throw off enough cash to fund the opening costs for a second unit. You’ll need good financial connections or cold cash to jump to multi-unit operation. And don’t forget you’ll need both opening costs and operating cash to tide each location over until it’s profitable.
“A lot of people are blinded by money and think ‘Wow, the more units I open, the more money I can make,’” says Daszkowski. “But they don’t realise that all these units they’re opening aren’t going to be profitable for 18 months, and that’s a lot more working capital you’ll need all at once.”
Develop Digital Marketing Competency In 3 Simple Steps
Conquering the digital revolution needn’t be daunting. Polish up your tech skills and watch your digital marketing prowess increase throughout your franchise.
As a franchisor, digital marketing may be proving to be a challenge due to the unique structuring of the business.
“The very nature of franchises is ‘structured’, however, when it comes to marketing, that structure often lacks,” says Marcela De Vivo, Founder and CEO of Gryffin Media.
Franchisors and franchisees often struggle to reach common ground when looking to achieve different marketing goals. While the franchisor needs to control the brand in its entirety, the franchisee wants to market their business using particular strategies suited to their location.
Research has found that smartphones are the biggest influencers of 82% of users when they make their in-store purchase decisions while. It’s for this reason that the importance of digital marketing for franchises has increased.
Here’s how to harness its power of influence, amplify foot traffic and solidify brand loyalty:
1. Recruit digital natives and early adopters
As much as you’re the leader of your franchise network, there are franchisees in your chain you could learn from. The global increase in millennial franchise owners means it is highly likely that you’ll be able to identify early digital adopters within your franchise network.
“The best people to learn from are those who have been in your shoes before,” says Matt Forman of the Franchise Centre at Griffith University.
“Encourage and support their efforts and use them as case studies to demonstrate to the rest of your franchisees the value of digital marketing, and how to do it right.”
2. Invest in training your team
“Each digital competency level requires more education and resources in order to integrate digital marketing with your physical stores,” says Forman. For this reason, regularly investing in continuous training for your team so as to ensure they keep abreast of any new and emerging trends.
Proactivity and adapting to the constantly evolving digital landscape led KFC to open a LinkedIn account for its founder and mascot Colonel Sanders. KFC’s out of the box tactic is a fresh approach to what has long been considered a B2B platform, under-utilised as a B2C platform.
3. Apply custom targeting techniques
The discovery of new and small businesses is being fuelled by Google searches, social media and online reviews, making these platforms a goldmine of invaluable tools.
Leveraging certain custom targeting techniques like easily searchable keywords and exposure on other reputable and high-traffic websites, gives your franchise’s digital marketing efforts a boost. This results in an effective campaign, favourable reviews and meaningful and lasting interactions with consumers “whether it’s a reply to a Facebook comment or a retweet,” says Entrepreneur’s Emily Conklin.
How To Hire Skilled Workers For Your Franchise
Your staff run your business – you just have to show them how. This is why employing the best people for the job is essential.
According to the Franchise Association of South Africa (FASA) 2017 Franchisor Survey, one of the main challenges facing franchisees is finding the right staff.
“Staffing your franchise can be one of the most challenging parts of running a successful business. Without a great team of employees, you cannot run your business effectively,” says Saxon Marsden-Huggins, founder of WebRover.
These three tips could help you find the best employees for your franchise outlet:
1. Don’t hire in haste
While you may be rearing to go and keen to fill gaps to speed up profitability, research your candidates thoroughly.
As the job applications keep flowing into your inbox, keep in mind that not all of them qualify for the positions available – it may even be a small percent who are actually viable candidates. This is why your hiring process should include:
- Taking the time to thoroughly screen CVs to develop a short list
- Creating a carefully crafted list of interview questions
- Setting aside adequate time for thorough interviews
- Getting to know the candidates through a second round of interviews to confirm your choice.
Giving the hiring process dedication and attention will ensure you get the cream of the crop, contributing to the long-term success of your franchise.
2. Demonstrate support in the workplace
While you can instil the necessary skills into new recruits, it’s difficult to train for culture. This is why choosing the right employees from the beginning will make the rest of your franchise management system will run more smoothly.
“The manner by which you run the franchise will influence employee perceptions of the brand as well,” says Hireology’s Erin Borgerson. “Your staff must become ambassadors of your franchise system to attract the target consumer market.”
The best way to do this is encouraging staff to give you their honest feedback. Your commitment to creating and upholding a positive culture will result in increased loyalty from your current staff and a superior pool of applicants.
3. Offer appealing incentives
When advancement opportunities are clearly communicated, staff is keen to hear how they can get there, as they have career goals of their own. Encouraging this ambition will draw good employees to your franchise.
“Helping employees understand the steps to advancement helps them to view their current job as an important part of a career with an upward path, not just a pay cheque for this week,” say financial reporting technology experts at Qvinci.
Performance bonuses and employee benefits incentivise staff’s efforts, therefore increasing their income alongside the profit of the business. “This serves to make employees a part of the business and not merely people ‘who work there’,” they explain.
3 Ways Communication Helps You Run Your Franchise Better
Managing your business as an independent owner may have been challenging at the beginning, but – as you’ve come to realise – the successful operation of a franchise network requires an extended set of skills.
“When it comes to a multi-location business such as a franchise, effective communication is vital,” says Dani Peleva, Managing Director at online marketing agency Local Fame. “So what happens when you’re struggling to connect with the franchise network you have in place?”
It may be time to upgrade your franchise management skills, because the success of your franchise network has a direct correlation to how you integrate feedback systems into your management processes.
Have a clear comprehension of the challenges your franchise encounters, keep an open chain of communication between yourself, franchisees and managers, and maintain regular interactions between everyone in the network. These are some of the most crucial aspects of successful franchise management:
1. Understand the challenges you face
A thorough understanding of your business requires dedication to regular and consistent groundwork for first-hand experience on how the day-to-day operations of the business are conducted.
“Seeing and talking to the people that make your business will help you understand the challenges that franchisees face and the systems they need to drive higher profitability and growth,” says Rosie Niblock, Marketing and Communications Manager at Proactive Marketing.
“That way you can work more effectively to make improvements to franchise management systems logically and within the financial grasp of all franchisees.”
2. Get personal through regular visits
You never want your franchises to feel neglected. It’ll demoralise them and possibly drop sales, profits and their ability to keep the business running as you intended. Maintaining regular contact and sharing as much information as possible – when you can – fosters strong relations with your franchisees.
Empowerment through information and communication makes a difference in the business and helps franchisees make decisions in favour of the business and to make sure that they all pull in the same direction in terms of customer satisfaction, says Alan van der Westhuizen, executive manager of new business sales at Fournews, a 20-year-old franchise holding company for News Café, Krispy Kreme, Moyo, Brooklyn Brothers, Smooch, Cafe Fino and Go! outlets.
Ensure your response to these concerns is swift. “If not discussed they could fester ad create undesirable rumours,” says Niblock.
3. Create events for network collaboration
One of the most important aspects of managing your franchise is meeting with all your franchisees, at least annually. “Franchise conventions are almost certainly the biggest tool when it comes to building profitable engagement,” says Peleva. “They’re one of the most important things to focus on when you’re considering how to lead your franchise network.” According to her, a successfully attended and executed convention will let you:
- Boost your network-wide productivity
- Hugely increase your profitability
- Drive passion for your brand
Communicating with your franchisees is the best way to identify problems, work towards solving them, and building a pleasant and fruitful relationship with your owners.
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