Why Financing and Site Selection Matter
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Why Financing and Site Selection Matter

Why Financing and Site Selection Matter

Multi-unit ownership is a franchising trend that's likely to keep growing. It picked up during the recession, when capital was hard to come by and franchisors saw how their single-unit owners struggled. Now, multi-unit operators own more than half of the franchise units in the U.S., and the upward trajectory is expected to continue. Single-unit ownership has its benefits, but multi-unit owners tend to have more experience, more business relationships, and the ability to move quickly when expansion opportunities present themselves.

So when considering a franchise opportunity, it makes good business sense to consider a multi-unit plan from the start. And in considering a multi-unit strategy, take a careful look at financing and site selection.

Why Financing Should Top Your List

Money matters, and the bigger your plan, the more money you will need. That can be a good thing. Banks and other lenders are receptive to owners who have multi-unit plans and need capital for equipment and other larger purchases. But, as they would with any type of loan, lenders will want to know about your assets and liabilities and your plans for growth, expansion, and revenue.

Here are steps you should take to get the loan you need for your multi-unit business:

  • Develop a plan: Create a strategic plan for growth that uses realistic projections. Your plan should give a "big picture" look at your multi-unit business and its potential for growth. Don't focus on individual locations because some of your units will perform better than others. Develop this plan with oversight from your franchisor who can help you set revenue goals for your first location and goals for opening subsequent locations using available capital and financing.
  • Ask for suggestions: As you work with your franchisor on your strategic plan, you'll also want to discuss lenders. The franchisor may have relationships with lenders who understand the franchise business and are more inclined to offer support. Some lenders specialize in financing multi-unit franchise operations.
  • Discuss your plan: Once you have identified a lender, show the lender your plan. Let the lender ask questions and offer advice, so that you can create an effective financing strategy that supports your growth and doesn't leave you undercapitalized. Your franchisor will also be a key source of support here because your franchisor can make the case for your business loan.
  • Nurture your relationship: You're in this for the long haul, and you want your lender to be there with you. Work your relationship with the lender, meeting regularly, discussing successes, and revising your growth plan based on performance. Trust between you and the lender is crucial as this will be a long-term relationship.

After Financing, Consider Location

Location. Location. Location.

It's a common expression when discussing business success. It's fitting to repeat when discussing success for multi-unit franchise owners because location is doubly important.

Location matters to the customer and the business owner.

To attract customers, you want the usual, a good location in a high-traffic area with great visibility. You want good parking and you likely want to be near a competitor - and you want these attributes for each of your locations.

Mapping tools are available to help you identify the sweet spot, but you will need good negotiating skills and an understanding of the pitfalls of leases to get the best multi-location deal possible.

When you do find locations, look at them with a jaundiced eye. Don't let emotion lead you into locations your customers can't find because your signage isn't visible to passing traffic.

And, if possible, locate your franchised businesses near each other, so you can positively affect your bottom line in terms of marketing, staffing, and employee retention.

Marketing: Because your stores are in the same market, you can take a regional approach to marketing and create campaigns. You won't have to get buy-in from other franchisees because you will own the geographic space and can determine the promotions you will offer across your locations. You can also get better pricing for your advertising based on multiple locations.

Staffing: Keeping your offices in close proximity allows you to effectively move staff from location to location, based on where and when they are most needed. Because your stores are near each other, you aren't asking employees to drive way out of their way to get to work.

Employee Opportunity: A multi-unit operation requires a good management system. Such a system allows you to create positions for growth within your business. If you own a tax business, for example, employees can go from being a tax preparer to office manager to regional manager and more. These growth opportunities help with employee retention. When employees see opportunities to move up the ladder, they have good incentive to perform well and reason to stick around for promotions.

John T. Hewitt is founder and CEO of Liberty Tax Service and SiempreTax+. Liberty Tax is one of the fastest growing tax preparation franchises in history, reaching more than 4,000 locations in 15 years. SiempreTax+ launched in the 2015 tax season and already has about 150 locations.

Published: August 3rd, 2016

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