Your Franchisee Isn’t Running the Franchise. Their Manager Is.

By Sean Goldsmith

Multi-unit franchisees cannot run every location themselves. Sean asks whether franchisors are checking management depth before approving the next store.

Franchisors spend months deciding whether somebody is qualified to own a location. Once that franchisee starts expanding, much of the business can end up in the hands of managers the franchisor barely knows.

Franchisors are careful about who they allow into their systems. Prospective franchisees are interviewed, financially vetted and trained before they are trusted with the brand. That process can take months, and for good reason. A poor operator can damage a location, lose customers and create years of problems for the franchisor.

Then a successful franchisee opens a second location and hires somebody else to run the first.

By the time that owner has five locations, they may spend relatively little time in any one of them. The daily decisions about labour, service, stock, complaints and local sales are increasingly being made by salaried managers. That is how multi-unit franchising has to work, but it creates a problem when the franchisor spends more time checking whether the franchisee has enough money for the next location than whether they have enough good people to run the ones they already own.

Money Opens the Store. Managers Keep It Working.

A franchisee with sufficient capital can sign another lease, fund the fit-out and pay for the opening. Their bank balance tells the franchisor very little about who will deal with a staff shortage at 7am on Tuesday or what happens when the owner is busy at another location.

A good manager knows where labour can be reduced without hurting service, which employee is ready for more responsibility and which customer complaint needs dealing with immediately. They notice waste, poor standards and maintenance problems while there is still time to do something about them.

A poor manager can let those problems sit. Labour costs rise, good employees leave and maintenance gets postponed. Customer complaints become more frequent and sales begin to soften. The franchisee eventually sees the damage in the numbers, but the problem may have been building for months.

Once an owner has several locations, the quality of the people managing them has a direct effect on what those businesses earn.

The Sixth Store Can Damage the First Five

A franchisee may have four excellent locations partly because they are still close enough to the business to influence what happens every day. They know the managers, visit regularly and can step in quickly when something goes wrong. The franchisor sees the results, likes what the operator has achieved and approves another territory.

The next opening puts that arrangement under pressure. The owner is suddenly dealing with construction, recruitment, training and the usual problems that come with getting a new location trading. Time that used to be spent visiting established stores is now being spent getting the new one open.

If the management team is strong enough, the existing locations carry on without much disruption. If it is not, the new store can create problems well beyond its own four walls because the owner is no longer available to compensate for weaknesses elsewhere in the business.

That is why another opening should depend on more than liquidity and a good sales history. Before approving further expansion, the franchisor needs to understand whether the franchisee has built an organisation capable of coping without the owner being everywhere at once.

Franchisors Should Know the People Below the Franchisee

Nobody is suggesting franchisors should interview every store manager as though they were awarding another franchise. They should, however, have a reasonable understanding of the management teams inside their larger franchisees.

Before another territory is granted, it is worth knowing who runs the existing locations, how long those managers have been there and what happens if one of them leaves. There should also be some understanding of who is being developed for the next management role rather than waiting until a new store is weeks away from opening to start looking.

The owner's role matters too. Three profitable locations can look like a successful multi-unit business, but if the franchisee spends every day moving between them solving operational problems, they may have built three good stores without yet building a company capable of supporting a fourth or fifth.

There is a big difference between somebody who can run a location brilliantly and somebody who can recruit, train and retain managers capable of running several locations without them. Franchisors planning to grow through existing operators need to know which one they are dealing with.

Manager Training Is Part of the Growth Plan

Manager development often sits somewhere inside the training or HR conversation when it should also be part of the expansion discussion. A franchisor that wants its best franchisees to keep opening locations needs those operators to have people ready to take responsibility for them.

That means identifying promising supervisors before a vacancy appears and teaching managers more than the mechanics of running a shift. They need to understand labour, stock, customer service and the numbers that determine whether the location is performing properly. Good people also need to see that taking on more responsibility can lead somewhere.

Franchisees carry much of that responsibility themselves. An owner who wants to move from two locations to ten has to become good at developing managers, because personal involvement stops being a reliable operating system long before the tenth location opens.

One of the best signs that a franchisee is ready to expand is therefore quite simple: the existing locations continue to perform properly when the owner is somewhere else.

Growth Depends on Who Is Ready to Run the Next Store

Established franchisees are attractive growth partners because they know the system, have a trading history and usually present less risk than an unknown first-time buyer. Those advantages can make it tempting to approve the next location as soon as the operator has the capital and wants another territory.

Previous success should not become automatic permission to expand. A franchisee can afford location number seven and still have nobody capable of running it, while promoting the best manager from an existing store may simply create a problem somewhere else in the group.

Franchisors should make management capacity part of the decision about further development. That means knowing which operators have built capable teams underneath them and which businesses still depend heavily on the franchisee turning up every day.

The money for the next location will always matter, but so will the person who unlocks the door once the franchisee is busy running six others.

What We Can Learn From This

Franchisors should assess management capacity before approving additional units for an existing operator. Capital and current sales remain important, but the review should also cover who runs each location, how dependent those businesses remain on the owner and whether another manager is being developed before the next opening. Franchisees planning to expand should treat management development as part of the cost and preparation required for another store rather than something to solve after the lease is signed. Brands that develop capable managers alongside successful franchisees have a better chance of growing their strongest operators without damaging the locations already making money.

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