Attracting and retaining those elusive multiple-unit operators: it comes down to creating an environment that encourages innovation, communication, and collaboration between the franchisor, suppliers and the franchisee and across the entire system.

Previously, franchise systems' successes have been due to their ability to attract individual franchisees and duplicate victories-over and over again. Many franchisees see purchasing a franchise as a great opportunity to take advantage off a business system that is already proven. Franchises are seen as a safer way to step into the entrepreneurial role without the start up headaches and uncertainties that come with establishing an independent business. Many single franchise buyers are actually buying careers with stability for themselves or their families. Even if these franchise owners become multi-unit operators, it is typically done over an extended period of time therefore the risk is spread out over many years.

Lately, however, there has been interest from many franchisors with the desire to attract and retain the successful franchisee that purchases and opens two, four, 10, or 15 franchise locations in a short period of time. This multi-unit operator audience is seen by some franchisors as the Golden Egg that helps guarantee victories more numerous and larger than in the past. Many franchisors, however, may not be prepared to support the multiple-unit operator. Most systems' processes and business methods are just not equipped to handle the different and additional needs of this kind of owner. This is where franchisors and multiple-unit operator may run into difficulties.

Some Similarities, Key Differences

Similar to single-location owners, multiple-unit operators are seeking a proven system, but the difference lies in the multiple-unit operators approach and ultimate goals. The multiple-unit operator franchisee tends to be more focused on the growth and overall profitability of the business rather than the every day issues. The difference to the franchisor is that the multiple-unit operator is an experienced business investor who has higher expectations, is more demanding and will voice opinions and ideas in an effort make the system better. Multiple-unit operators want to open multiple locations quickly to invest in and take advantage of economies of scale. Opening many locations at once, or over a shorter period of time, enables the multiple-unit operator franchisee to lower start-up and operating costs and realize efficiencies in staffing, training, purchasing, technology, marketing and accounting. They also benefit from more abstract rewards such as increased visual representation, market penetration, and so forth.

For the multiple-unit operator, the costs associated with opening many locations quickly mean increased risks. This operator must calculate whether this risk is outweighed by the opportunities that naturally exist when opening multiple locations, the incentives offered by the franchisor, and any possible opportunities that the franchisee can bring into the equation.

Multiple-unit operators are usually willing to spend more money upfront in operational support areas, such as technology and employee training, in order to realize a larger return on investment or to ensure increasing economies of scale. This is where many franchise systems fail. Most systems are set up and operate to handle the one or two location risk and reward equation--which just doesn't work for the multiple-unit operator. Many franchisors are iii prepared to allow for the multiple-unit operator's needs to realize this greater risk-reward equation.

Multiple Unit Operator Success

Take the multiple-unit operator's opportunity to finish off a market, whether purchasing many established single franchise locations to create a mini-dynasty, or purchasing new territories and roping them together. Some franchise systems are simply not developed around the idea of controlling the market by a single multiple-unit operators-franchisee. The multiple-unit operator is interested in purchasing, or starting, enough territories in an area in order to control the market. In addition to enjoying an increase of market share and benefits from economies of scale, this level of territory ownership makes it extremely difficult for competitors to come in and establish a market stronghold. In other words, increasing market dominance equals decreasing the likelihood of direct competition-both now and in the future.

Increasing market dominance equals decreasing the likelihood of direct competition.

Look at your franchise system with a critical eye. Is your system prepared to accommodate multiple unit operators? Has the home office researched what barriers there are to multiple-unit operators for the territory? Do territories exist and if so, how many are there? Is there an atmosphere of trust and partnership? Is your infrastructure staffed appropriately? Is the franchise training geared toward best business practices and theories, or tailored toward tactics to help the single location, hands-on owner? Is there an increased cost in systems to link offices? Are there technologies available to run the offices more efficiently, such as computer networking, phone systems, staff sharing software, product ordering and shipping. How open is the franchise system to new possibilities for the multiple-unit operator to integrate area specific needs and requirements into the system?

Systems that are not management-labor intensive are best when attracting a successful multiple-unit operator. Some systems have multiple-unit operator benefits built in. Incentives such as product positioning discounts, multiple location discounts, training discounts, etc.

With an expedited timeline for opening multiple locations, comes more risk for the multiple-unit operator in the risk-reward equation. Understanding this, it is imperative for the multiple-unit operator to attain higher rewards to offset he higher risk they face. Lower operating costs, built-in incentives by the franchisor as well as "bulk rates" offered by suppliers for buying larger quantities, are what multiple-unit operators expect to find. That is not to say that there is special treatment versus other franchisees in the system, but to understand that if there is more risk, there should be increased benefits to the multiple-unit operator for that risk.

Benefits to the Franchisor

By attracting and retaining multiple-unit operators, the benefits to the system are immediately visible.

* Savvy business owners seeking greater success for themselves and the system

* Success breeds success-one successful multiple-unit operator will attract others

* Realize economies of scale in other portions of the system

* Ease for home office administration

* Less franchisee disputes

* Lower training, development, marketing and sales costs

* Increased revenue from royalty payments

Fostering Innovation, Communication, and Collaboration 

There is always a risk with any new business--financially and emotionally. Becoming a multiple-unit operator is a greater risk as one could go into the hole deeper and faster. But, if run properly, the multiple-unit operator franchises will come out faster and succeed exponentially. This is where the risk-reward equation offering must be adequate. As with any investment review, if the franchisor does not offer this increased reward system, the multiple-unit operator is less likely to take the risk on their franchise system.

It comes down to creating an environment that encourages innovation, communication, and collaboration between the franchisor, suppliers and the franchisee and across the entire system. Franchisors and each franchisee should share success stories and best practices--and the best should be implemented across the system, regardless of where the idea originated.

John Gendreau is the owner of three Two Men And A Truck franchise locations in the Twin Cities. He can be reached at 612341-2800 or [e-mail].