The Path to Growth for Single-Unit Franchisees

Becoming a multi-unit franchisee is a goal many single-unit operators set out to achieve when joining a franchised organization. According to FRANdata, it has become the preferred strategy for more than half (54%) of those currently in a franchised system. It’s not difficult to understand why. Not only does it make great economic sense as it’s a quicker path to generating wealth, but it often takes the owner out of the day-to-day management of one business unit and puts them into an oversight role of multiple locations. Additionally, it can help to protect and diversify your assets by splitting your financial interests across multiple sites.

As an operations executive in the franchised world, I was a part of the decision-making panel regarding which franchisees could acquire more locations, either through resales or new builds, and which could not. In most cases, those additional locations went into the hands of existing multi-unit franchised groups. While I can certainly understand the rationale behind these decisions, with existing multi-unit groups having sound operations, deep people strength, and a higher net worth, it doesn’t make it any less frustrating for single-unit operators who want to expand their portfolio of locations.

One of the biggest reasons multi-unit groups have an easier time acquiring additional units than single-unit operators trying to get their second location has a lot to do with their consistent execution of the brand standards and strong people development practices that have managers waiting in the wings for their chance to manage the next location. It’s seldom that a franchisor will want to put more units into the hands of a franchisee who doesn’t consistently meet their brand standards or have trained unit managers ready to oversee the new location.

First things first

So, what can a single-unit franchisee do to help increase their chances of securing that next opportunity to grow? The first thing on the list should be ensuring their existing unit consistently executes brand standards in all operations areas. Most successful franchisors have operations manuals, job aids, and training materials that outline their brand standards and service expectations step by step. It’s your primary job as a franchisee to know them inside and out—and to ensure that your employees execute them consistently across all the dayparts your business is open.

Failing to perform this one critical step will jeopardize your customer experience, community reputation, ability to run a profitable business, and of course, your ability to acquire additional units. Getting the franchisor’s approval to buy more units when you aren’t running your existing unit according to brand standards will be very difficult. There are usually two main methods a franchisor will use to monitor execution at the business unit level: 1) operations assessments, and 2) customer feedback programs. Performing in the top quartile of your brand’s locations will serve you well if you desire to grow.

Operations assessments

Most large franchisors employ a team of regional managers whose primary function is to monitor the performance of the business units in their region. These assessments usually entail the regional manager spending a full day in your business unit observing how customers are served in relation to the brand standards. They may also look closely at things like cleanliness, adherence to marketing programs, and the repair and maintenance of core equipment needed to execute the business model. These visits may be announced and scheduled with the franchisee, or they may not, or they may be a combination of both. Regardless, the best advice here is to act like every day is assessment day. If you take this approach, you’ll consistently score well, ensuring that you take great care of your customers and give your franchisor confidence in your ability to protect the brand.

Customer feedback

Another common approach franchisors use to measure the consistency of the customer’s experience is implementing mechanisms that look at your online reputation and more detailed service assessments at the individual customer level. The best franchisors know that monitoring their customers’ experience is essential to overall system results. A poor service reputation damages the entire brand’s reputation and costs you and the system significantly when it comes to growing top-line sales.

A recent study by Womply, a digital-first organization that helps small businesses on Main Street thrive in the digital age, found that small businesses such as restaurants, retailers, salons, and auto shops with a star rating of between 4 and 4.5 had, on average, 28% higher sales than those establishments with lower star ratings. So if your business consistently receives negative customer feedback and has an overall star rating lower than the brand’s average, expect to be on the radar of your franchisor, as negative customer experiences affect every franchisee’s ability to drive sales and grow the brand.

Let your franchisor know!

Once you have your operational house in order, and not before, it’s time to make your franchisor aware of your desire to grow. Asking to meet with a member of the franchisor’s development team to discuss any resale opportunities is an excellent first step for single-unit owners, as the capital required to buy an existing unit is often less than a new build, making your breakeven point achievable much faster, which can help you build the necessary capital to acquire your third and fourth locations. You’ll also inherit a team of trained employees and management and an existing customer base, making it easier for you in the early days as you adjust to being a multi-unit owner.

The last piece of the puzzle

Suppose your location consistently operates above the chain average over a significant period of time and that you have the funds ready to invest. In that case, the last piece of the puzzle will be to ensure you’ve been developing leadership bench strength at your location so that you have a people plan ready to present to the franchisor. Taking over an existing franchise has many benefits for single-unit operators starting their growth journey, but I’ve seen many examples of significant staff and manager turnover when the new owner takes over the business. Having a team of well-trained managers and staff waiting in the wings of your first location should you need them to move to the new site will give your franchisor great comfort, and is often a key discussion point in the interview process when trying to acquire that next location.

Laura Darrell, author of The Principles of Franchisee Success: Apply Them and Take Control of Your Business Results, is a former franchise operations executive with more than two decades of experience working with Canada’s leading franchisors, Boston Pizza, White Spot, and A&W Restaurants, at both the franchisor and multi-unit franchisee levels. She brings technical insights in organizational leadership on how multi-disciplinary stakeholder collaboration between franchisees and franchisors unlocks enhanced business outcomes for both. Contact her at ldarrell@oldgrowthdevelopments.com.