You’ve made the decision, you’ve done all your homework, organised your finance, finished the training and now you’re there… running your own franchise business.
Life sure has changed a lot since you started in business – it’s exhilarating and you love every minute of it. So, what happens next?
One of your options for the future is to expand your business by opening another store in your franchise network i.e. become a multi-unit franchisee. This option is being explored by more and more franchisees now as they grow their businesses to the next level.
It makes a lot of sense to use the knowledge you’ve gained in running your new business and leverage that into two, three, four or more stores inside your franchise system. It also makes more financial sense to do this rather than put your money into other investments – whose returns you have no control over.
Plus, your business has a much higher rate of return that most investments in the market place. Isn’t that why you got into business in the first place?
A lot of franchisors are now encouraging this trend, as it makes a lot of sense to encourage existing franchisees to expand and grow their businesses. It keeps top performing franchisees in the system and gives them the opportunity to set goals which form part of their long-term business plans.
It also gives franchisees the opportunity to develop and grow substantial businesses, which not only add value to the brand but also become huge wealth generating assets for the franchisee.
Here are some things to think about before you go down that road:
It is critical that you have a very good understand of the key drivers of your business.
As a multi-unit franchisee, your focus must change from operational to more strategic. You are going to have to develop your financial skills, as well as staff recruitment and management skills. If you have these skills from your previous work life experiences, you are ahead of the game already.
Measure your performance against other franchisees in the system. This way you can start to gauge whether you are achieving good market penetration in your current store before you move on to your next one.
You are going to need money in the bank or credit facilities to finance your expansion.
Take the time to do this as going into your second store highly leveraged is a recipe for disaster. If you had to borrow a lot of money to start your first store then make sure that you have paid a good part of that off before starting your next store.
Sit down with your accountant and do some serious financial modelling, making sure that you understand the cash flow implications of a second store. I also recommend break-even analysis so that you know what sales levels are required in the second store and the impact it can have on your overall profitability.
Choosing the location of your next site is just as important as the decision you made to choose the location for your first store.
This time you know more about your business and your customers and this knowledge is going to help you enormously in analysing and choosing your next location. Thoroughly research your site selection, and work with your franchisor to ensure you have chosen the right site.
There are a lot of factors to consider and sometimes you just have to be patient as you wait for the right site to come up.
If it’s not right, don’t jump in – there is no hurry to jump into a second-rate site. Don’t forget you already have an existing business to run. Your franchisor is going to be an enormous help to you here, as they are going to have their own research in this area and will be able to provide you with some very important information.
Building a strong management team and an administration infrastructure to run your business is critical as you move into the next phase of your business growth. leveraged to grow your business and add even more stores.
It provides pathways for your staff where you can offer rewarding careers for your most talented staff members, offering them a variety of different roles at different locations. This will help you retain and attract great staff.
This is probably the most expensive part of running your business but the good news is that this infrastructure can handle multiple stores and it is this leverage that will make you serious money in the long term.
The management system and infrastructure you run is the backbone of your business. Make sure that you are using the latest technology available to keep your administration costs down. It is vital that it gives you the leverage to grow the business without having to resort to increasing your staff numbers to cope with the growth.
As soon as you start thinking about expansion, talk to your franchisor. They will have the experience of helping other franchisees that have followed this path and will be able to provide you with a checklist of all the things you have to do. There will also be clauses in your Franchise Agreement that govern this and you will have to check whether your Franchise Agreement allows you to do this and that you are eligible for a multi-store franchise operation.