Growing with Multi-Brands
Franchise owners are facing a variety of opportunities to grow their portfolio. The industry is continuing to grow at a rapid pace and with that, new and emerging franchise opportunities abound. The continued growth of the franchise industry is bringing with it multi-unit franchise owners who are growing with multi-brands.
There are many factors to consider when looking to expand your franchise operations, especially if looking to add additional brands to the portfolio. Aicha Bascaro, CEO and founder of the American Franchise Academy says that many franchisees that find success in one brand grow restless and soon start coveting other brands. Much of the reasoning, she shares, is based on the belief that if you are able to do it with one brand, why not 2, 3, or more?
Adding additional brands to the portfolio sounds like fun and is a great way to grow, especially if you are the restless kind. However, as Bascaro points out, the challenge is that as you grow into multiple units and multiple brands the way you operate your business changes significantly.
Here Bascaro and The Rawls Group partner Jeff Bannon share 5 key factors important to keep in mind as you expand and grow your enterprise.
1. Management Systems
AFA: Make sure you have solid management systems in your existing units so that as you focus on a new and exciting brand, your original units continue to perform well.
TRG: Consistent systems, and accountability to them, allows an owner to work on the business (adding new brands) rather than in the business. Reducing the dependency on executive oversight also creates a strong environment for succession of leadership, while securing the value of the business which is largely based on ongoing profitability.
2. Operations Leadership
AFA: Make sure that before you expand into a second brand that you have enough units, volume, and profitability in the first brand to be able to hire the appropriate leaders so that those units get the oversight and attention they need to keep operating with excellence even when your eye is no longer on them.
TRG: Bench strength is obviously critical. No one likes to do twice the work for the same profit, which is what typically happens when you have to dilute your talent pool to accommodate growth. Hiring outside managers is always an option, but expect culture challenges without a formal, effective onboarding process. It is also good to consider incentive alternatives other than ownership when providing opportunities/rewarding key managers.
AFA: When deciding on your second brand, it is important that you take the opportunity to diversify industries so that if one is in a downtrend the other one can help balance the finances. The diversification of industries also requires specialized teams so that they understand the business and operate them with expertise.
TRG: Stabilization of earnings can be achieved through diversification of capital. Understanding the cyclical nature of the investment in light of current holdings is fundamental to developing long term, sustainable growth.
AFA: Many speak of taking advantage of the synergy that is created when growth happens and other brands are acquired. However, if the distances are expanded between the unit and the businesses, a lot of that synergy advantage quickly disappears because you are not able to leverage the operations.
TRG: Geography is a significant factor when bench strength and culture can't travel. At the same time, growth in the same market may cannibalize earnings, again resulting in twice the work for the same profit. However, the opportunity to create efficiencies and reduce operating costs can go straight to the bottom line.
AFA: It is attractive, fun, and exciting to think of bringing a new brand into an already healthy and well-run organization, and sometimes it can be its demise if the cultures between those businesses are so different that they clash. Challenges will arise, power struggles will occur, and this unbalance can affect the acquired brand results and the existing brand results. There is a case to be made that even when you acquire brands to achieve synergy, that the operational team remains separate in order to protect their identities and culture that have made them successful in the first place. A careful integration may need to be done to the shared services departments. However, that is easier since those teams work face-to-face in an office most of the time and teamwork is much easier to create in that environment versus one where team members are mostly in the field and rarely see each other.
TRG: Mission, vision, and values will need consistency among all brands. Franchisees need to develop a strong sense of identity and make additions of new brands with cultural alignment as part of the considerations. Employee turnover will be reduced when there is a sense of loyalty to the franchisee instead of the franchisor.
With all this, Bascaro suggests you proceed with caution. While the idea of becoming a multi-unit, multi-brand franchisee sounds very glamorous and synergistic, you are also taking on additional challenges that are not often considered and can cause damage to the culture and results that are difficult to recover from.
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