Growth Club
1851 Growth Club
Keys To Successfully Growing From One Unit To Multiple Units
To make multi-unit growth work, franchisees and franchisors need to work together.
For years now, the franchising industry has seen a marked shift toward multi-unit growth. Numbers from FRANdata show that multi-unit franchise owners now own more than half of franchise all units in the U.S., and the trend shows no signs of slowing down. It makes sense. Multi-unit growth presents an attractive opportunity for both franchisees and franchisors to grow, penetrate markets and diversify their business.
The benefits for both sides are many. For franchisees, owning multiple businesses results in increased profitability and better efficiencies. Multiple locations give franchisees the ability to leverage their resources across units and across customer bases. They can cross-train employees, for example, or cross-market to their existing client base. For franchisors, working with fewer experienced franchise owners allows them to focus on growing in the places—and at the pace—that they want. Plus, it allows them to achieve greater consistency across their locations. In addition, rapid growth can lead to increased visibility for brands, which in turn helps attract franchisees with a proven track record of managing multiple units.
As with most everything in business, however, multi-unit growth also comes with risks, so franchisees and franchisors must work well together and be able to rely on each other to carry out their business’ vision for growth.
Five Steps to Achieving an Effective Multi-Unit Strategy
Have A Clear Vision: Having a clear vision is an important element of achieving growth. For franchisors, communicating their vision with franchisees and getting behind that vision is essential to meet goals. For franchisees, having a vision they can clearly communicate to their units as they grow allows them to maintain consistency across their businesses.
Find The Right People: Whether you’re a franchisor or a franchisee, it’s important to surround yourself with people who share your vision and values. As a franchisor, you want to find franchisees that have the infrastructure to manage various locations and have an understanding of business principles, management and hiring practices. They have to be a right fit for your culture and share your vision for growth. At Driven Brands, we look for multi-unit operators with keen financial understanding of franchising who are interested in contiguous growth. By contiguous growth, we mean owners who want a development agreement in adjacent states. For example, with MAACO, we secured a development agreement for the entire West Coast. Multi-unit owners also need to find the right talent to help them sustain a large operation. Therefore, it is crucial that these owners start the hiring process with a clear idea of what they are looking for and what their needs are.
Find The Right Partner: Franchisees looking to grow must also be sure that they have, in the franchisor, a good partner. Do they offer franchisees the tools they need to grow? What type of support do they provide? What is their leadership like? Are there coaching programs that will help them succeed? Do they have the infrastructure to support their growth?
Be A Good Leader: Running multiple units is completely different than running just one. As your company grows, your role in the business changes. You may no longer be involved with all decisions. You may not be able to be as hands-on as you were with your first store. That’s when having good leadership skills become critical. Become a mentor for your key people, communicate that vision, delegate, and hold your people accountable. The same is true for franchisors. In order to grow the system, companies need be good leaders too. Having a clear strategic plan, open lines of communications with franchisees and a solid multi-unit program in place are some of the key things franchisors need to lead a successful multi-unit franchise model.
Think About Funding: Having the capital to expand from one to multiple locations is, of course, necessary for growth. Franchisees must have funding, whether from their own pockets, or through business partners or lenders. These days, however, it’s common for private investors to fund multi-unit franchise units. For us, at Driven Brands, it’s important to find investors who have multi-unit retailing experience but not necessarily industry experience. We recently signed a territory development agreement with a large private equity firm who is looking to diversify from hotels and restaurants into the automotive aftermarket. We also look for “patient equity.” That is, long-term investments that will be patient and stick to the brand vision in moments of aggressive growth and moments of moderate development.
Even though multi-unit growth carries risks, by keeping these factors in mind, both franchisors and franchisees can increase their chances of success and ensure that they’re prepared to keep up with the rapid pace of growth so ubiquitous in franchising these days.
Jose R. Costa is Group President for Driven Brands where he leads MAACO®, CARSTAR and Drive N Style®. Collectively, these brands operate more than 1,000 body shops across North America, generate more than $1.2 billion in annual system sales and further establish Driven Brands as a leader in the automotive aftermarket space.
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