Multi-unit franchising on the rise

Increasing numbers of franchisees are taking up second franchise outlets, although relationships with franchisors appear to be suffering as a result, according to new research.

The Franchise Relationships Institute recently surveyed 870 multi-unit franchises about whether their needs differ to single-unit franchisees, of which 2,700 were surveyed.

According to the survey, multi-unit franchisees have a greater sense of achievement, particularly their level of optimism and work satisfaction, and their satisfaction with the performance of their businesses.

However, they are also significantly less satisfied with the relationship they have with their franchisor and the practical support they receive.

Greg Nathan, managing director of the Franchise Relationships Institute, says the results are important because multi-unit franchising is an increasing trend.

“Franchisors, wanting to use multi-unit franchising as a growth strategy, need to look at fresh and innovative ways to support their multi-unit franchisees and engage them constructively in the franchise system,” Nathan says.

Nathan identifies the biggest challenges faced by multi-unit franchisees:

• Raising capital to continue their expansion, either by purchasing or carrying out refurbishments on their new units.
• Keeping their teams motivated and committed to maximising performance.
• Finding suitable mentors who can provide them with the guidance they need to take on a new level of leadership.

Steve Wright, executive director of Australia’s Franchise Council, says the number of multi-unit franchisees has been growing for several years, and franchisors are starting to respond to the trend.

“Some [franchise] systems are now actively promoting it as opposed to responding passively to it once somebody is a success,” Wright says.

“Systems now include incentives to take up a second franchise within the first two to three years because they recognise it as something useful for both the franchisor and the franchisee.”

“Buying another franchise unit is one accessible way of growing without having to start up a whole new business.”

Wright says as franchisees take on additional units, they can sometimes struggle with the transition from operator to manager.

“The best advice [with regard to becoming a multi-unit franchisee] is to look for good council from people who have done it. Start inside your own franchise system and then look outside your systems to get a spread of experience,” he says.

“There’s never any lack of advice from people within the franchising sector, and what better help can you get than that from your peers?”