If you’ve successfully established your first franchise it can be tempting to jump in and buy a second one. But beware to tread gently as doing it wrong could mean catastrophe
So you made the leap and opened a franchise. You’ve established the business, aced the training and developed your employees and, which is the best part, made enough money to invest in another unit or in another franchise business. But before making any decisions you should stop, analyse and fully prepare as the next step is even more critical than the first.
Expanding quickly can be damaging to you and to the franchise brand you’ve built a relationship with. For this reason it’s important to ensure that your decisions are being made intelligently and that sufficient preparation is undertaken to mitigate any risks. While responsible franchisors should assist you by helping you make a full critical analysis of your business, there are a number of questions you’ll need to ask yourself before jumping in all over again.
Do you understand your numbers?
Depending on how long it has taken to get into this position you may or may not have a full year of accounts to go through. And excruciating as it may sound, remember that expanding your business before you’ve gone over your latest numbers would be a mistake. This is especially true in your first year as there are often anomalies effecting profitability in the first year which will not be present in the second. It is essential to run cash flow, profit and loss projections for your business to ensure continued liquidity and profitability in the second year. It is vital to understand the real performance of the business before committing the time and finances to a second unit or to any other new venture.
Is there more work still to be done?
The business may be making good money but would it be better to wait? After all, no one is going to be as motivated to improving the business as you. If there is plenty of room to grow and improve the business then your time and money may be better spent maximising its potential before taking your foot off the accelerator and focusing on something new.
Do you have the time?
Unless you have a time machine or are in possession of cloning technology it’s impossible to be in two places at once. Therefore ensuring you are in a position to be able to leave the business for extended periods without performance dropping is another critical element to success. If you’re considering buying into another franchise model then the training requirement may prove more challenging than you expect. And if you chose, like many others do, to open a franchise to give yourself a better work-life balance then you should think carefully before taking on even more responsibilities and commitments.
Do you have the right people?
The people working for you should be suitable for the current structure but always remember the old adage “while the cat’s away the mice will play”. Given that your time will be divided it is advisable to promote or recruit a manager, train them and ensure they’re ready to be left to run the business. It’s also essential to develop and empower the whole team so that they are capable and willing to make the decisions you have been making. This will ensure that your time with the new business won’t be taken up by being called or emailed every ten minutes.
Are you ready to go the distance?
Before opening a second business it’s important to give proper consideration to the distance and the route you will need to commute and travel between the businesses. Your effectiveness will be negatively impacted by the travelling time between these locations and it’s important to recognise that it may be necessary to travel between them multiple times on the same day. If you’re looking at a new franchise system, you may wish to open an outlet in the same town as your first franchise but you should check in advance it is available, noncompeting, and viable for your location.
Do you have the right support?
It’s important to ensure you have the support of any business partners and your family, as their backing and support will enable you to remain focussed and motivated. If opening a second unit within your existing franchise system then make sure to get as much support and further development as they are prepared to provide. Good franchisors should have all the tools, systems and training materials for effective multi-site management and should be eager to share their knowledge to the benefit of all.
Having resolved all of these considerations the last question to ask yourself is “Should I expand within the franchise system I am all ready working with, jump in with another franchisor or start something for myself?”. There are pros and cons for each of these options and the associated risks also vary from proposition to proposition. Fortunately, by giving the above proper consideration you can ensure the money-making business is as protected as it can be. Franchisors are usually keen to keep you operating within the brand but not for the reasons you might think; the main benefits of staying within the franchise system is that it enables you to stay focused and driven to maximising the performance of the business which benefits both you and the franchisor.
This article comes courtesy of Brian Gregory of CeX, the second-hand entertainment franchise