Busting the Four Great Myths of Multi-Unit Franchising

While it is important to have a solid vision and financial plan for achieving it, successful single-unit operators fail as multi-unit investors for reasons that are not necessarily financial. Let’s clear the air from the start by reviewing and busting four great myths of multi-unit franchising.

Myth #1: The hardest part is getting the financing

Clearly, you need a business plan that demonstrates where the money will come from and how it will be paid back. It’s your road map to building business value. This includes a source of cash flow (cash reserves or a credit line) dedicated for the new location. Many expansions have failed because owners robbed the cash flow and financial capacity from their first unit to support the second. Getting the necessary financing is essential, but it is not necessarily difficult, especially if you have a track record of profitability from Unit #1 and a solid business plan for Units #2 and beyond. Getting the financing is not the hard part. Giving up control of operations is—and is a necessary step in enterprise development. Micromanaging operations of multiple locations doesn’t work, no matter how much financing you have.

Myth #2: Great operators will make great multi-unit owners

Some people are just great operators. They run a tight ship, pay attention to detail, and submit information and respond to requests on time. They embrace the ops manual and know exactly what it takes to run a great operation. These habits check most of the boxes on a franchisor’s checklists of criteria for expansion. Yet many great operators struggle to be great multi-unit owners. Why? Because to successfully manage multiple locations you must let go of day-to-day operations. For some, this means relinquishing control of the things they like best and trusting others who may not be as good at it.

Myth #3: Multi-unit franchisees must work harder than single-unit owners

The multi-unit owner’s most important tasks are to select, place, nurture, and support their operations teams. And, of course, to ensure that the franchise recipe is followed. If it is a good model with good systems for monitoring KPIs, this approach works. No longer is the owner tempted to work into the wee hours to make operational deadlines, because it’s not their job. Instead, they rely on their mastery of KPIs and communication skills to build a strong team. They define expectations through written, measurable goals. They establish effective meeting agendas and a cadence to monitor results and coach up performance. No more spinning plates and “being busy just being busy.” Work-life balance is now within reach.

Myth #4: It takes fewer franchisor resources to support a multi-unit 6-pack than six single-unit owners

Multi-unit owners are not buying a job, they are investing in a portfolio. And for that they expect to earn impressive returns on their investments. They likely have good business savvy and expect the franchise model to work for them. They typically rely heavily on franchise resources (including support teams) to train and support their operations staff. Support teams work with non-owner location managers who are not “invested” and may not be as motivated as single-unit owners doing the same job. And non-owner managers leave. Turnover in operational management requires additional training and support that would not be needed in an owner-operated location. These factors can cause multi-unit operations to rely more heavily on franchise support than single-unit, owner-operated locations.

Conclusion

While we may have dispelled these four myths, one great truth survives: multi-unit expansion is a no-brainer when the franchise model and the franchisee possess the competencies, capacity, and capital to replicate scalable operations, build strong teams, and manage remotely.

This article is the last of a four-part series from Profit Soup and is used here with permission.

Barbara Nuss is president and founder of Profit Soup, a financial education organization specializing in providing services to franchisors and franchisees to enable them to trust their numbers, focus on priorities, make better decisions, and earn more profit. She can be reached at barbara.nuss@profitsoup.com or 206-282-3888.