12 TIPS FOR M
Greg Nathan of Franchise Relationships Institute explains how to tap into the power of multi-unit franchising as a growth strategy
ulti-unit franchising, where franchisees own and operate more than one business unit or territory, is increasingly popular. For example, a McDonald’s franchisee might own four or more restaurants, while many petrol stations are operated by multiple franchisees who might own 10 or 20 outlets in the same region. Even in the service sector, it’s not uncommon for franchisees to own multiple territories, while in retail the same franchisee might own 2 or 3 outlets in neighbouring areas.
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This approach offers franchisees and franchisors an efficient path to boost sales, profits and market share. Offering good franchisees the opportunity to own several business units increases the appeal of a franchise through offering a path to growth, reduces the cost of recruitment and training for franchisors, and helps to overcome the current shortage of prospective franchisees which may be restricting expansion. However, despite the benefits for both parties of being able to ‘grow with who you know’, there are also significant risks. In this article, I’ll share 12 evidence-based tips for franchisors from our years of research and experience at the Franchise Relationships Institute. 1. Create measurable expandability criteria You need to know whether a franchisee is capable of running multiple units – especially if the potential for multi-unit franchising was not in your original plan, and existing franchisees were recruited for their ability to run single units. Create a checklist of the capabilities and resources known to impact on a franchisee’s performance in your network, particularly those relevant to running multiple units. The expandability criteria should be linked to a rating system that enables the franchisor team to objectively compare franchisees against predefined standards, described using observable behaviours. This type of behavioural rating system brings a high level of internal consistency and is known as a Behaviourally Anchored Rating Scale or BARS. 2. Make the expandability criteria transparent Transparency enables everyone in your network to have a shared understanding of what excellence looks like. It also places an onus on the franchisor team to ensure their criteria are clear, fair and relevant. This is particularly important if several franchisees are vying for the same business expansion opportunity. High potential franchisees will want to know what you are looking for so they can prepare their business operations for the assessment. 3. Don’t say ‘No’, say ‘Not yet’ When a franchisee is assessed against objective expandability criteria, gaps in their capability or performance will inevitably be exposed. Some of these may not be easily rectified, or the franchisee may not be committed to taking action to change their approach. If a franchisee is rated as ‘not ready to expand’ but is still motivated and wants to improve their operations, provide coaching on how they can close their capability gaps, and encourage them to apply again at a future date. Franchise New Zealand
Year 28 Issue 03