As the franchise industry continues to experience another year of strong growth, franchising continues to permeate every community and almost every industry in the world. While research shows that interest in franchising remains at an all-time high, many franchisors continue to “stay single” — that is to say that they focus on attracting single unit franchisees rather than multi-unit franchise developers.
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However, some savvy franchisors are turning their attention to multi-unit developers, franchisees who operate multiple units (typically in one market, and sometimes on a set area development schedule). After all, as Rick Bisio of Forbes points out: “the more locations you have, the more valuable your business becomes. Larger franchisees who diversify through a variety of locations are also better positioned to withstand an economic downturn — something we witnessed just a decade ago.” A recent report by the International Franchise Association Education Foundation found that while just under 20% of all franchisees are multi-unit owners, they account for more than half (52.6%) of all units, and they average between 4.3 units (in single-brand systems) and 5.83 units (in multi-brand systems).
While this has long been a growth strategy for some of the biggest names in the franchising industry, it needn’t be limited to one size of franchise system. In fact, emerging franchisors can often prove to be a very alluring prospect for multi-unit developers.
The key to successfully attracting multi-unit developers to your franchise system is to realize that multi-unit developers know the value in diversification, and therefore, so should you.
The most important selling point with regards to selling to multi-unit developers is to realize that the same strategies that work with single-unit developers will be different for multi-unit owners. Furthermore, strategies and approaches will be different for each type of potential multi-unit developer. The key is to understand the different types of multi-unit developers and then develop a plan to build value by highlighting your franchise system’s features and benefits in a way that is differentiated for each target group.
The Experienced Multi-Unit Developers
Generally speaking, these are the larger investment groups that treat franchises like stocks — adding to and diversifying their portfolio and evaluating potential franchise opportunities in terms of financial reports, balance sheets, and projected industry growth. These type of developers might own upwards of a hundred franchises throughout the country. The main benefit of this type of developer is that they understand franchising and they generally have teams in place that can smoothly and effectively run the franchise’s day-to-day operations. These current Multi-Unit Developers typically attend franchise shows and expos as well as attend professional franchise networking events.
They generally have a pulse on the franchise industry and its sub-sectors as a whole, so you’ll want to attract them with the bottom line: your potential for growth and strong return on investment. Franchise expos and other industry events provide the perfect opportunity for you to briefly highlight your business’s strongest financial statistics as well as a few key points about what sets your brand apart from your competitors.
Internal Growers
Another common strategy is to convert current single-unit franchisees to multi-unit owners. After all, they know the business from the inside and out, the good, bad, and ugly, so there’s really no need to sell current franchisees as you would someone who is unfamiliar with your business. They are already your biggest brand evangelists. These types of franchisees can also be excellent candidates to become area representatives, who then sell franchises to prospective franchisees within a prescribed territory. These types of franchise owners often train and monitor franchisee compliance within their designated territory. The main benefit of this arrangement is that the franchisor has a knowledgeable representative in a market, especially one located at a significant distance from corporate headquarters. This is especially useful as the franchise system grows nationally and even internationally.
Build From Within the Community
When determining what makes an individual a strong candidate for multi-unit ownership, experts generally cite several key characteristics: well capitalized, strong background in business and leadership, experience in developing businesses in new markets, and a commitment to growth and long-term success. While prior franchising experience is valuable, many generally well-funded and experienced entrepreneurs without franchise experience can succeed as multi-unit owners. The key here is to present the financials as you would with experienced multi-unit franchise developers, but also tout the benefits of not just your brand, but the franchising industry as a whole. For example, a successful real estate developer may understand finances and management, but he is not likely to be as well-versed with the potential of the franchise business model as franchising industry insiders may be. These types of multi-unit owners will likely be heavily reliant on the expertise and guidance of you and your staff, so be sure to explain how your franchise business model and operations manual plays a key role in helping your franchises succeed.
Think Outside the Box
Just as you might look to successful entrepreneurs within your local community, you should also look for other successful individuals and groups within your professional network. Maybe an extremely successful software startup company provides your POS and scheduling software and has a solid grasp of your industry and business model. Maybe you know of a vendor who already supplies your franchise with products or services and would logically benefit from expanding into the other side of the business. Multi-unit owners of other non-competing franchise brands, especially any that you partner or cross-promote with, are another potential untapped resource, and one that already has your brand on the radar.
Finally, it is important to remember that this type of franchise prospecting and growth is not just limited to North America. Franchise expos, networking groups, and other marketing tactics can provide valuable opportunities to meet multi-unit developers who specialize in international master franchise and sub-franchise agreements and who can help to take your brand worldwide.
For more information about how to effectively market your franchise to multi-unit owners and developers, give us a call today at 708-249-1090 or chat with MJ’s chatbot.