Top Three Best Practices for Multi-Unit Franchise Success

I recently attended my first Southeast Franchise Forum/IFA Franchise Business Network luncheon. In addition to indulging in family-style ravioli and cheesecake at Maggiano’s, I was also happy to see former coworkers, meet some interesting new people, and learn some practical tips to successfully run a multi-unit franchise operation.

There were three panelists in the discussion. The first was Greg Vojnovic, Chief Development Officer of Inspire Brands (and former coworker of mine at Popeyes). Joining him were co-founders of LSGF Management, Grant Simon and Greg Thomas (LSGF stands for Life’s Short, Grow Fast). Grant and Greg’s company owns 50+ Great Clips, 90+ T-Mobile, and six Smoothie King franchises in six states across the southeast. These guys know what they’re talking about.

Before discussing the top three best practices, the panel agreed that a given for any brand wanting to attract successful multi-unit franchisees is providing a well-structured Item 19 in the Franchise Disclosure Document. This portion of the FDD outlines earnings claims or financial performance representations like average gross sales and cost breakdowns. These can give a clearer picture of how a franchise can be profitable even though they can’t predict what will actually occur. Any franchisor who has their eye on large growth needs to make sure they provide this information.

photo of young lady drinking milkshake

@rebekah via Twenty20

1. Streamline Communications

When talking about the first best practice of streamlined communications, the panel agreed that the franchisor should designate a Senior Director to be the franchisee’s point of contact. This person would be a seasoned consultant who could advise a busy multi-unit operator on a variety of topics based on experience, or know exactly who to contact to get answers or guidance.

Grant and Greg Thomas advised franchisors against breaking out their resources by region or market. Since they have locations in six states, it’s not helpful for them to work with multiple field consultants. The same goes for brand update emails. They much prefer one email with thoughtful information from a combination of departments instead of individual emails from finance, marketing, operations, etc.

For multi-unit and multi-brand operators like LSGF Management, it’s important that the brands they partner with focus on their business and not the other brands that the franchisees own. If a brand makes it easy for a franchisee to do with business with them and makes them money, they will keep opening more units—regardless of how many units they have with other brands.

2. Maximize Territories and Locations

When it comes to deciding which territories or markets to enter, Grant and Greg Thomas feel a new market isn’t worth pursuing unless they can open 7-10 units. Only opening 2 units in a territory just isn’t worth the resources. They find that they are most profitable with a District Manager and a Training Director overseeing 7–10 units.

For brands to build an infrastructure that will attract successful multi-unit franchisees, they need a plan that includes building out a territory over 3–5 years—not just one opening. Grant and Greg Thomas encourage brands to have more long-term development plans for proven developers, and smaller plans for franchisees who are just starting out.

They also advise brands not to target their development down to an intersection, but to base development in their franchise agreements on markets or territories. Franchisees should be able to choose the trade area first, then the location. If a target development area is too specific, it could take years or decades for a unit to open.

3. Be a Disruptor with Technology and Innovation

Franchisors who invest in technology are more attractive to multi-unit operators. Providing franchisees with centralized POS systems and Back of House software is key to benchmarking and tracking performance.

Grant and Greg Thomas stressed the importance of the franchisor identifying the metrics that franchisees need to monitor in order to run the business. Greg Vojnovic spoke from experience on a crucial piece of the technology puzzle: deciding who is going to pay for it. Many franchisees are very supportive of implementing new technology, they just don’t want to pay for it. One way to approach this issue is to have the advisory board determine how the technology costs will be covered, like charging franchisees a monthly fee.

Brand Criteria for Multi-Unit Owners

The moderator of the panel, Therese Thilgen, Co-Founder and President of Franchise Update Media Group, told us that they conduct an annual survey of around 100 multi-unit owner franchisees who are looking into additional brands. Following are the criteria that are most important:

  • Leaders who listen to their franchisees and have built trust
  • Profitability including:
    • A well-structured Item 19
    • Brand profitability overall, not just for some franchisees
  • No pushy salespeople

Greg Vojnovic gave us his take from a franchisor perspective. He gravitates toward multi-unit owner candidates that will add value to the franchisee community. How will they help us improve the system?

Grant added that franchisors should do their due diligence when researching potential multi-unit owner candidates. They don’t have time to fill out complicated and lengthy applications. When Grant and Greg Thomas were asked what they look for in a new brand to partner with, they mentioned that it doesn’t matter whether they’re emerging or mature. They look for a profitable business model at a multi-unit level. The model needs to work with a structure of multiple units run by a District Manager, Training Director, and Regional Manager. They said they also look for timeless concepts and steer clear of fads. Grant and Greg noted that haircuts, cell phones, and smoothies aren’t going anywhere.

One thing that I really love about the franchise industry is that the possibilities are endless. I love Grant and Greg Thomas’ story too. They were neighbors and discovered that they would make great business partners, so they went for it. They plan on continuing the growth of their company and footprint. I’m looking forward to following the story of their journey. 

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