Franchising in Australia has long been popular for entrepreneurs seeking to leverage established brands and proven business models. As the franchising sector continues to evolve, many successful single-unit franchisees are contemplating the next step in their entrepreneurial journey: multi-unit franchising. This strategy, which involves owning and operating multiple franchise units of the same brand, offers the potential for significant growth and increased profitability.
However, it also comes with challenges and responsibilities that differ from single-unit ownership. Before taking the plunge into multi-unit franchising, it’s crucial to carefully evaluate whether this path fits with your goals, skills, and resources.
Aspects To Consider When Considering Multi-Unit Franchising
Here, we discuss the key aspects to consider when deciding if multi-unit franchising is your right growth strategy.
- Assessing Your Financial Capacity
Multi-unit franchising typically requires a substantial financial investment. You’ll need to consider the initial franchise fees for the units, real estate costs or leases for all locations, equipment, and inventory for each unit, and working capital to sustain operations until profitability. Evaluating your ability to secure financing through traditional bank loans, SBA loans, franchisor financing programs, or private investors and partners is essential.
It is crucial to analyse the units’ potential return on investment (ROI). This includes projecting revenue and profit margins, considering economies of scale in purchasing and operations, determining breakeven points for each unit, and assessing the long-term value appreciation of multiple units.
- Evaluating Your Management Skills
Multi-unit ownership requires strong leadership skills, including hiring and training competent managers, effectively delegating day-to-day operations, and developing standardised processes across units. Time management becomes increasingly critical as you’ll oversee multiple locations simultaneously, balance strategic planning with operational oversight, and manage relationships with various landlords, suppliers, and community stakeholders. Your problem-solving abilities will be put to the test as you address issues across various units, implement solutions that scale across locations, and adapt to varied market conditions in different areas.
- Analysing Market Potential
Investigating the franchise’s expansion opportunities is crucial. This involves examining existing territories open for development, demographic trends in potential locations, and conducting a competition analysis in target markets. Evaluate the franchise’s market position, including consumer recognition and loyalty, adaptability to local market preferences, and track record of success in various locations. Research the franchise’s growth trajectory, looking at the historical performance of multi-unit operators, the franchisor’s expansion goals and support, and industry trends affecting the franchise’s sector.
- Examining Operational Complexities
Consider the infrastructure needed to manage the units, such as point-of-sale systems that integrate across units, inventory management tools for various locations, and communication platforms for dispersed teams. Evaluate your ability to manage supply chain complexities, including coordinating deliveries across all units, negotiating bulk purchasing agreements, and maintaining consistent quality across locations.
Prepare for increased HR responsibilities, such as recruiting and retaining quality staff for all the branches, developing a management talent pipeline, and implementing consistent training programs across units.
- Assessing Franchisor Support
Investigate the franchisor’s multi-unit infrastructure, including specific support programs for multi-unit operators, territory planning and development resources, and their track record of supporting successful multi-unit franchisees. Evaluate the depth of assistance provided, such as advanced training programs for multi-unit management, dedicated support personnel for multi-unit franchisees, and access to peer networks of other multi-unit operators.
Understand the marketing support offered, including coordination of marketing efforts across different territories, flexibility in local marketing initiatives, and co-op advertising programs for multi-unit operators.
- Considering Your Long-Term Goals
Reflect on your career aspirations, including your desire for increased challenges and responsibilities, your long-term vision for your role in the business, and work-life balance considerations with expanded operations. Consider your eventual exit from the company, considering the increased value of a multi-unit operation for potential buyers, options for gradually selling off individual units, and the potential to develop a family business legacy.
Assess your comfort with increased risk, including financial exposure across all locations, market fluctuations affecting these areas, and regulatory changes impacting your entire operation.
Making An Informed Decision
After carefully considering these factors, it’s time to make an informed decision. If you have the financial capacity, strong management skills, and a strategic mindset, multi-unit franchising could be an excellent growth strategy. It offers the potential for increased profits, greater operational efficiency, and a more robust business portfolio.
However, if you’re more comfortable with hands-on, single-unit management or if your financial resources are limited, it may be wise to continue optimising your current operation before expanding.
For details about setting up a Franchise in Australia, call The Franchise Institute at 1300 855 435. You can also send us queries through this contact form.