Growing with Confidence

Last year Aziz Hashim, Chairman of the IFA, addressed our annual Multi-Unit Summit to an audience of 130 franchisees and franchisor executives. Because Aziz is, amongst other things, a highly successful multi-unit franchisee, he spoke with passion and credibility. His clear and direct message was this.

If you are going to take on additional franchise units, do it carefully and purposely with your eyes wide open. Do it because you want to, and because you have done your homework and believe you can make a success of it. Not because your franchisor offers you a deal or is pushing you to expand for their own reasons.

Aziz also said it’s important for franchisees to invest in the right infrastructure, both in people and technology. And for franchisors to provide the right guidance, support and systems, including a profitable multi-unit business model.

Some eye opening statistics

I know from follow-up conversations that the Summit was life-changing for several franchisees who as a result totally restructured their businesses. And it caused some soul searching for the franchisor executives present, as they considered whether they were providing the right level of guidance and support.

Here are some statistics which may surprise you. These come from the research we did in the lead up to last year’s Summit:

• Of the 50,000 business format franchisees in Australia today (NB: I am referring to franchisees not franchised units), 25% of them are run by multi-unit owners who generate over 50% of the franchising sector’s revenue.
• The percentage of multi-unit franchisees in Australia is 5% higher than in the USA because Australian multi-unit franchisees operate an average of three units, whereas it is five in the USA.
• The percentage of franchised units controlled by multi-unit franchisees is continuing to grow in Australia and the USA at around 1% a year, mainly due to bigger multi-unit operators getting bigger. In fact, in the USA 23% of all franchised units are controlled by less than 1% of franchisees!

Given that over half the Australian franchising sector is now run by multi-unit franchisees, I reckon this makes them a pretty important group.

If you are a franchisor reading this, chances are you have multi-unit franchisees in your network. Maybe you are dabbling with the concept, allowing some of your better franchisees to open an extra unit or two. Or maybe you have gone gung-ho, encouraging your stronger operators to grow. After all it’s a lot easier expanding your network with existing franchisees who you know, than it is to find new ones.

Success lies in the how, not the what

Working with hundreds of franchise networks, we have seen franchisors swing from enthusiasm to aversion when it comes to multi-unit franchising, as hopes of rapid expansion have been extinguished by the horrors of multi-unit disaster. For instance, one franchisor, who embarked on a vigorous program of granting additional sites to their franchisees, then banned the practice after some spectacular failures, but is now putting their toe back in the water.

The truth is, multi-unit franchising is like any other business strategy. Excellence in execution is more important to success than the strategy itself. Not only is multi-unit franchising here to stay, it will continue to grow. Those franchisees and franchisors that take Aziz Hashim’s advice and do it carefully and purposely will prosper, while those that do it in a reactive or opportunistic manner will probably vacillate in their commitment to this important growth strategy.