Why Multi-Unit Franchising is So Hot

My last tip referred to some US trends that provide a peek into the future of Australian franchising. One of these is multi-unit franchising. A couple of weeks ago over 1,000 multi-unit franchisees and franchisor executives came together in Las Vegas to learn and share ideas at a special multi-unit conference. I asked one of the presenters, Steve LeFever, for his top three take outs.

Steve’s first point is that “margin compression” from high competition and sluggish sales, particularly in the Quick Service Restaurant space, is forcing franchisees to focus intensely on cost control. Because it is more difficult to get funding for new units, franchisors are now also focused more than any time in the history of franchising on improving the financial health of their existing franchisees. The more switched on systems are doing this by providing better information and teaching franchisees how to use it to improve profitability and cash flow.

Steve’s second point is a new “fickle consumer”, empowered by social media and increasing price conscious, is now tipping the scales away from brand loyalty - a disturbing trend. This means delivering a consistently great customer experience is more important now than ever before. Not surprisingly the best operators are rigorously measuring the behaviours that make a real difference to customer satisfaction in their particular business.

Steve’s final point is there is now “less room for error”, which means franchisees who understand the importance of tight systems, great people management process and sharp financial controls are the one who are winning. He says this is why good multi-unit operators are growing faster than ever before.

While multi-unit franchising continues to grow in the USA and here (we think it will account for over 60% of the Australian franchise sector’s revenues by 2013) it is definitely not an easy path. For instance I was talking to Lesley Gillespie, co-founder of Bakers Delight, yesterday about the challenges and opportunities of running multiple businesses. She made the point that while a good franchisee can usually expand to two, or maybe three units if there is a partner involved, running more than this is “exponentially harder” and involves a higher level of business and people management skills. This is certainly also our experience. Indeed we have discovered through our most recent research that franchisees who spend more time working “on their business” make significantly more money and deliver a significantly better customer experience.

If you think it would have been cool to be at the USA multi-unit event, you didn't need to be. Because we are having our own Multi-unit Summit right here where high calibre multi-unit franchisees and franchisor executives will explore and share ideas on how to improve unit level profitability and performance.

And some other good news. Steve LeFever has also agreed to across from the USA and participate in this event as well as run as special Profit Master Bootcamp. You’ll find details of both events on the main page of the website.

Please help us spread the word as these two events are going to be something really special to help keep our franchising sector on the right path to sustainable success.