Franchise Mogul: How franchisees are building an empire within an empire
The modern franchisee is becoming a savvy entrepreneur by buying multiple franchises
The modern franchisee is evolving into a different, more entrepreneurial, beast
A growing legion of savvy franchise investors are taking a more corporate-minded, strategic approach to business growth where strategic planning, business modelling, legal matters, staff recruitment and terms like ‘economies of scale’ are as big a part of their working week as any successful independent business owner.
Building themselves their own empire within an existing empire, they are multiplying the number of franchise units they own to effectively form a separate company, and attractive future selling proposition – all under the banner of an established brand with the greater security, brand recognition and marketing support that goes with it.
A hybrid of traditional franchisee and freethinking entrepreneur
One such franchise owner is 26-year-old Troy Millet, who purchased his first Cafe2U franchise at Scoresby, Victoria in April 2011. This was followed by the purchase of a second Cafe2U franchise in Scoresby in October last year before purchasing a third franchise in Notting Hill In February this year.
Millet identified the world’s biggest mobile coffee franchise in Australian-born Cafe2U as the chance to build “a company.”
“I wanted to turn a little franchise business into a company. It comes back to resale. It will look far better in 5-10 years time when I want to sell the business. With one van, you are part of a franchise. With multiple vans, you are still part of a franchise but you are selling a company with greater resale value. With multiple franchise territories I am in the process of walking away from business somewhat (on a day-to-day basis as an operator) because the customers you have will be customers of our product - not just me as an individual.”
In fact, Troy has plans to buy 2 or 3 more franchises.
Multi-unit franchise owner on the rise
Cafe2U Australasian Franchise Recruitment Manager John Stanton believes the incidence of the multi-unit franchise owner is becoming more commonplace in Australia, across all franchise models from lower to higher entry cost.
“What we are seeing more often is that someone comes into the system to run one and run it very successfully – then sees the opportunity to expand within their territory or an adjoining territory. Duplicating then becomes a passive income,” he explained.
“The business comfortably generates the income to pay the employee they take on, and pay them well - but it is still a nice investment for the owner. It doesn’t take alot of managing; it is just an easy way to turn on a new arm of the business without a lot of moving parts.
“Down the track they may have a vision to extend even further and have 3 or more franchises - all with managers - and the owner would completely step out and just manage the staff, manage things overall, and eye opportunities for the business.”
Stanton believes people from corporate backgrounds were more likely to develop into multiple franchisees.
“It is a different type of franchisee that looks to expand. It is the one with the wherewithal to look for growth, to manage staff, to really understand the business planning and business modelling and understand the scope and growth that purchasing multiple units provides for them,” he said.
“Usually it is more the ex-corporate person because they are more comfortable recruiting staff and understanding the legals around having staff, and understanding business models.
“But just recently the over the past 12 months younger franchisees in our system like Troy Millet and Louis Tu have come in and run very dynamic business on their own. They have the energy and they are learning as they go but they have moved into multiple units and are making a real go of it.”
Providing career path for family members
25-year-old Sydneysider Louis Tu, who owns Cafe2U franchises in Homebush Bay and Greenacre has, like other multiple franchise unit investors, expanded his operation to employ family or friends, offering them a secure job and career path in the bargain.