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The rise of the serial franchise owner

By Joseph Pisani

Canada has more than 78,000 franchises and, according to the 2018 Canadian Franchise Industry Economic Outlook, $99 billion was contributed to the country’s economy last year as a result of this business sector. Franchising is incredibly important to this country (and its economy), and it is seeing tremendous growth, giving rise to the number of multi-owner franchises—or what this author calls “the serial franchise owner.”

Photo © www.bigstockphoto.com
Photo © www.bigstockphoto.com

It is no surprise when one considers the opportunities and benefits available to the serial franchisee:

  1. Greater stability. Business is characterized by ebbs and flows. As good as things are going, there will eventually be a bit of a downturn. With a single location, those downturns tend to be harder to weather. But with multiple locations, a downturn in business at one location can be offset by healthy growth at another.
  2. Expansion. There is the opportunity to scale and expand the business quickly. This can be in an existing market to increase share or in different areas or provinces. As a franchisee, one can scale as quickly as they are able to manage.
  3. Brand awareness. Building a brand goes hand-in-hand with expansion, and having multiple franchise units provides the opportunity to build a unique brand image and voice. Sharing a message across different locations also means a franchisee will be spending less on their marketing efforts.

That said, one might wonder why every franchisee does not take the serial franchise owner route. While this author has highlighted the upside, there are risks involved, too. Therefore, to help a prospective franchisee make a decision on whether they should expand the business, the following key factors should be considered:

  • Hands-off versus hands-on approach

It is important to think about the way one wants to work. With a single franchise, a franchisee wears a lot of different hats and is on the front line of the business day in and day out. With a multi-unit franchise, franchisees start to become their own mini corporation within the larger franchise brand. These owners quickly transition to a CEO role for the other locations and will need to focus more on delegation, human resources (HR), and operations.

  • Higher investment required

This will likely come as no surprise, but with a multi-unit franchise a larger investment is necessary to purchase additional units. At this point, one will want to take a hard look at their current operating costs and finances to fully understand what needs to be done to be profitable across multiple locations. Having the capital for the investment is a great first step, but potential multi-unit franchisees should be prepared to play the long game, as it may take some time before the investment starts to pay off.

  • Timing

The importance of timing tends to be underrated and it is not discussed often enough. Prospective serial franchise owners need to look at what else is going on in the market as a whole, the sector in which they are operating, and the area(s) where they are looking to open. It is a good idea to get a full view of the external conditions to get a better idea of what will be involved to be successful.

  • It is not simply rinse and repeat

Each new franchise location is unique; different locations mean different demographics and prospective customers. Therefore, it is important to determine the market potential for each location, as research will go a long way!

Outside of these considerations, networking and chatting with peers can also help when thinking about becoming a multi-unit franchise owner. Talking to people who have made similar decisions can help provide a clearer picture of what lies ahead. It is also a good idea to find a partner—someone to turn to who understands the nuances of the business and franchising as a whole.

Franchising is steadily on the rise in Canada, and it is here to stay. This author expects the franchising industry to continue to see strong growth, especially as more Canadians choose this career path. There are certainly a lot of opportunities in regards to making the leap to a serial franchise owner, but it is important one takes the time to consider the things discussed in this article to find the right partner, as this will be one of the most valuable steps on the road to success.

Joseph Pisani is the director of North American industry sectors, franchise finance for the Bank of Montreal (BMO). For more information, visit www.bmo.com/franchising.

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