An update from the BFA and ‘Exploring the pros and cons of multi-unit franchisees’

Alongside an association update, the BFA discusses a popular current topic: In slower recruitment times, is it better to sell new territories to existing franchisees or hold out for new ones?

An update from the BFA and ‘Exploring the pros and cons of multi-unit franchisees’

With the longest day of the year and the British and International Franchise Exhibition at Olympia both behind us, here at the BFA (British Franchise Association), the largest and longest-standing franchise trade association in the UK, we are ramping up for a very busy summer and autumn period.

The eagle eyed amongst you may have noticed that we rebranded recently, and our new brand values are Growth, Innovation, Positivity, Diversity and Inclusion, Trust and Passion.  But in reality, what does that look like? We like to think our brand behaviours illustrate them perfectly: “We always offer to help, we never stop learning (and teaching!), we have a ‘can do’ attitude, we celebrate individuality, we are mindful of others and we wear our hearts on our sleeves.” So, with that in mind, let’s get cracking and tell you what’s currently on our radar. 

Academy and head office 

In recent weeks members of our head office team have been delivering training to franchisors to improve the support they give to their franchisees at different points in their franchising lifecycle. They’ve also been working on an exciting new DE&I campaign with McDonalds (watch out for the adshels appearing across the UK) and of course, getting ready to judge the annual BFA awards and to launching EWIB (Encouraging Women In Business) which takes place in September.

Exploring the pros and cons of multi-unit franchisee

One topic that has cropped up a few times during conversations with members over the past few weeks is the benefits of recruiting new franchisees vs selling territories to existing franchisees (multi-units).

This is no doubt partly brought on because of the more stringent checks being put in place by banks before lending money, but, as we heard from them at our recent ‘Finance, Funding and Forecasting’ seminar, the money is there to be lent, you may just need to jump through a few more hoops to get it and key to this is arriving at your first meeting with the bank with a robust and realistic business plan.

We asked our senior support manager, James Sedgwick, ‘With external recruitment taking longer, is internal recruitment the way forwards? Or could it stunt the growth of a network?’ 

He responded: “Multi-unit owning franchisees can work very successfully for some brands but not for all. For instance, if a brand is ‘emerging’ ie they have only been trading for a couple of years and have maybe up to 10 franchisees, then we wouldn’t advise selling new territories to existing franchisees. An emerging franchise needs new blood, new passion and drive and the network could stagnate if too many territories are owned by one franchisee. Also, having one franchisee who owns too many units could upset the delicate balance between franchisee and franchisor, if the tail becomes larger than the dog, who wags the tail?”

He also warned: “There is also the risk that selling an owner operator a 2nd territory could make them lose focus, meaning the franchisor ends up with one and a half territories being fully serviced rather than two, which in turn could result in unhappy customers and a damaged brand reputation.” 

James stressed that to avoid this situation stringent checks must be made by the franchisor to ensure a franchisee is capable of running two territories simultaneously and successfully before any sale is made.

Rachel Brooks, managing director of Swimtime who are big fans of the multi-unit franchise owner model said: “We currently have 32 territories, owned by 19 franchisees. Of those 19, eight are multi-unit owners. Our largest franchisee owns three territories and is caretaking two more owned by Head Office, in a ‘try before you buy’ agreement. Before a franchisee can buy another territory, they must prove to us that they are growing their original territory by 10-15% each year, following the model and still hungry to grow. From my point of view as a franchisor it makes perfect sense. I don’t have to spend so much time or resources on recruitment and training, I have fewer franchisees to manage and I’m still growing the brand. When we recruit new franchisees now, we are actively seeking potential multi-unit owners. One of our franchisees is now turning over just under £1 million a year; it’s great for them and it’s great for us too.”

Recruitment Boom – The Cat Butler, pawfectly poised for success

Take heart though, recruitment does continue; emerging franchise The Cat Butler has recently taken on seven new franchisees in four months, with each new franchisee siting the age old ‘work life balance’ as a reason for leaving their former careers and buying a premium cat care business.  Undoubtedly recruitment is taking longer for some though. One member reports: “We used to record 21 ‘touch points’ before a franchise sale, that is now up into the mid 70’s.”  So, hang in there, the sales are still there, they are just taking a little longer to get over the line.

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Pip Wilkins
Pip Wilkins