6 Reasons Why Multi-Unit Franchisees FailAug 11, 2021
It’s so sad to see a franchise closing its doors! That’s why I dedicate this week’s blog to explore the most common reasons for failure in this model. If you are a multi-unit franchisee, take note of these red flags and, most importantly, take action to save your business!
Reason #1: Not knowing how the model works
There’s a significant difference between owning one unit and managing multiple ones. When you only have one unit, you are there executing the strategies, working with your team, and managing the operations daily. However, when you become a multi-unit franchisee, your responsibilities change because your main job now is to inspire others to do that execution the best possible way.
Making this shift requires specific skills and management systems that you have to learn and develop by yourself. Because when you invest in a franchise, you acquire the right to duplicate a proven brand, product, service, image, and regional and national marketing. But the contract doesn’t come with a business degree in business management, that's up to you. (Not to worry! Learn here how we can help you obtain this critical knowledge).
Reason #2: Lack of management systems
When you have multiple units, your business becomes more complex. And since you can’t do all the work by yourself, the need to delegate tasks to the leaders of your organization increases. To maintain control of what happens in every store, and make sure the operations are consistent and profitable, you need to implement disciplined business management systems.
Reason #3: No qualified leaders
Having the right people to take responsibility for the operations and the execution of the systems is critical. These leaders will help you run your business the way you would, as well as represent your business and the brand appropriately.
That’s why finding the right people to trust your operations has to be a priority if you want to grow your business. To ease the process, I recommend developing an internal leadership bench, to identify potential managers and prepare them to take the lead of your company. Watch this video to learn how to do it.
Reason #4: Operations without reports
The fourth reason why multi-unit franchisees fail it’s because they don't have the reporting systems to give the store leaders, and yourself, the proper information and key indicators to improve the business.
So many franchisees, especially multi-unit ones, spend too much time working in the business rather than working on the business. This happened to one of my amazing clients, before she reached out to us for help. She was just scrambling, working ungodly hours, going from one unit to the other, and this crazy schedule left her with very few opportunities to design the overall strategy of her enterprise.
Don’t let this happen to you! As a business owner of a multi-unit model, you must have the right business reporting to have a 360 view of your organization. But also, you need to take a specific amount of time every day to monitor the most important numbers of your business and focus on the areas that need to be improved to detonate growth. If you want to discover what are the three most important numbers in your business, don’t miss this blog.
Reason #5: No strategies to change the performance
If you have the right information you’ll be able to identify if a unit is underperforming. But what happens if you do not know how to change that direction? Not knowing how to turn things around to improve sales, labor cost, product cost, or even customer service, can be a death sentence for your business.
When you operate just one unit, you can overcompensate by working harder and being more present in the day-to-day operations. But when you have a multi-unit enterprise, you cannot do that.
That’s why it is so important not only that you know your numbers and have management systems, but that you are educated by either a coach like myself, a mentor, or somebody that can guide you on what to do when things are going in the wrong direction.
Reason #6: Franchisees playing the wrong role
The sixth and very important reason why multi-unit franchises fail is that franchisees don’t understand what their role is, especially when they grow into a multi-unit organization. They tend to be very used to running, managing, and making all the decisions so when they have to delegate tasks, they have difficulties.
As a multi-unit franchisee, your role is to oversee the units, to put the right leaders in place so that they can run the business for you. At this point, you only have to supervise and do the follow-up to ensure that the systems that you have implemented are being done the right way.
To be able to fully embrace this role, you need to have the management systems in place, as well as the necessary data to monitor the performance of your business. Also, you have to trust the leaders that are operating your units so that you can delegate the execution. The sum of all these elements will allow you to take the time to work on your leadership skills so that you can strategize and make smart decisions for your company’s growth.
Do you want to become a successful multi-unit franchisee? The American Franchise Academy is here for you! We offer many business tools to help you achieve your dreams. Follow us on our social media (Facebook, Linked In, YouTube) where we share posts and videos with business tips, knowledge, and valuable information to improve your operations.
- Can you identify any red flags of failure within your organization?
- What actions can you take to prevent that unwanted outcome?
- How well developed are your management systems and your leadership bench?
- How can you strengthen your skills as a business owner?
WATCH THIS VLOG on YouTube HERE