Custom International And Domestic
Franchise Specialists

Operational Expansion

Operational Expansion– Recruiting Multi-Unit, Multi-Brand Franchisees
By Frank Steed
April 21

Going after the big fish
10325222_10203211400078638_7678177076122254627_nThere are some key questions to ask before deciding to take this route to further expansion.  What has been your growth strategy in the past?  What is the make-up of the franchise system today?  Will the financial returns the brand offers be attractive to large, multi-brand franchisees?  Does the company have or is it willing to put in place the infrastructure needed to support these large, powerhouse players?

Does the leadership team and ownership have the personality and desire to deal with powerful owners who might well have more clout and larger systems and sales than it? How does your story sell against those who will compete against you for these few, highly sought-after giants?  Does your sales team have the business savvy and sophistication to reach these players and get their attention?

Still want this big fish?
Consider, for a moment, just how sought after these folks are.  In the food-service industry, this group of multi-brand, multi-unit franchisees is so targeted that they have their own trade shows and magazines.  It’s obvious why franchises have chosen these people as their target.  Most of the companies I work with today have gone for these successful operators.  It is not unattainable, but it is a move to the big leagues, and you’ll need to be prepared to step up your game to a whole other level of play.

These multi-unit, multi-branded operators have their pick of the top brands.  They are proven operators who are well capitalized and have investors anxiously throwing more money at them. They understand franchising and how to play the game.  Obviously, it is an attractive way to grow.

A few things to keep in mind
It’s true they can become your biggest allies, but they do carry a very big stick.  While they can open doors for sites, build out territories rapidly, run your highest volume units (while single-unit franchisees struggle to get their first unit open); they will want in return big territories–sometimes even larger than they are capable of building out effectively.  They will ask for and expect “deals” and franchises will be put in the position of appearing to their existing franchisees to be playing favorites.

“The concept must have the best people, the right product, be financially sound, have available real estate and supply the right returns or we’re not interested,” says Don Zale, a multi-unit franchisee of Blockbuster and Palm Beach Tan.

The steps to big growth
With all this in mind, there will be franchisors who know it is time to target the multi-brand, multi-unit franchisee.  They will be ready to go back and address the basics identified as, “The Four Steps to Success in Franchising.”

Step one:  Are you ready?
Have you reviewed your current situation; does this strategy fit with your existing franchise approach?  Is the ownership and leadership committed to working with these high profile and powerful groups?  Do the numbers work for the returns required to attract these successful operators?  Are systems and processes sophisticated enough to compete with the existing brands these franchise systems are a part of?  What will the existing franchise community think of this new approach and powerful players coming into the fold?  Answering these questions in the positive will show that you are prepared.

Step two:  How Big? How fast?
What is your growth strategy?  Are territories clearly defined for both company and franchise growth?  What is the current and proposed mix of company to franchise units?  How many potential locations are there for the brand?  Are there sizable territories for growth that won’t negatively impact the existing locations and franchise agreements?

Step three:  Do you have the right stuff?
This is a big one.  A large part of your success will be determined by the processes and tools in place to sell and support.  Is the sales team capable of calling on these sophisticated players?  Are business points well thought out and competitive?  These players will want deals.  How will that sit with the existing franchise community?  Does the uniform franchise offering circular just meet the legal requirements or is it actually a selling tool?  Does the franchise have an Item 19?  These prospects will demand proven returns for their investment.  They will not respond to a request such as, “You must call my existing franchisees for help in building your business plan.”

Additionally, do you know who your best prospects are and where to reach them?  How are you going to get a face-to-face meeting and are you prepared to make your point in a succinct 30-minutes?  Remember, they’ve seen the best in your market.  What is it that sets you apart and why should they join your system and not one of a dozen others?  Do you know what characteristics will make them successful in your system and do you have an articulate, well-planned presentation that will allow them to see this?

Along with that, how will the company market to these potential franchisees?  These candidates are not searching the Franchises for Sale pages in the USA Today, the Wall Street Journal or Nation’s Restaurant News.  Franchisors must have the right materials to put into their hands (not to mention at the right time) in order to set the hook. Up to this point how effective has your public relations been?  Franchisors will need to be aware of the opinions these operators will already have.  Much like the public, they will have formed opinions from what they’ve heard in the press and your sales pitch may have a few hurdles to get over.

Even if your company has got their interest, it will need to be able to present to them that it has clearly defined processes and tools to help address each of the following: encroachment issues; site approvals; developer and manager training and certification; and design and construction.  Has the company established a proven model for opening new locations successfully?  Is the ongoing support model working well for existing franchisees?  Franchisors will need to be prepared to answer all of these questions.

Keep in mind these candidates are already members of some fairly sophisticated organizations.  How does your organization measure up?  Multi-unit professionals will want to deal with pros in training, development, marketing, and so on.  They will expect a real estate model, not guess work.  They will expect state-of-the-art manuals and operations support, not works in progress.  They will be comparing your company to the best in the business.  It won’t be enough to know you’ve got something good, you’re going to need to show them that you’ve got something great.

Step four:  How integrated is your system?
In order to grow successfully, the machine will need to run smoothly.  All of the people involved in the system—from staff, to franchisees, to customers—will need to play an important role.  To this point, have staff and franchisees had an opportunity to participate in the strategic planning process of the company?  Are they given ample time and the proper forum to share their ideas for improvements and other changes to the system?  Are their views given serious consideration?  And, most of all, do they feel heard?

How does a company know if it’s succeeding in this easier-said-than-done area?  Does it measure its effectiveness on a regular basis and does the company use it to make further refinements and improvements to the system?  Has the franchise gone beyond comment cards in order to ascertain a more quantitative measurement of guest satisfaction?  Knowing that happy employees usually result in happy guests, what is the company doing to measure its employees’ happiness?  Has the organization even considered measuring franchisee satisfaction?

Ready to target multi-branded, multi-unit operators?
Good luck. Yes, the firm is up against everyone else, but if it has a proven brand, a successful track record, proven economics and can answer all of the above questions with an emphatic “yes,” then there is no better group of prospective franchisees to help grow your concept and make it one of the real super brands of tomorrow.
Frank Steed is president of the Steed Consultancy.  He can be reached at  903-396-7176 or fsteed@thesteedconsultancy.com.