Growing Your Existing Franchise Portfolio

We often get calls from current owners of franchise businesses asking that all important question: “What should I do next?” The answer depends on a few factors, but is usually pretty easy to start narrowing down to if we take a close look at where they started and what their goals are.

In a very general sense we see existing owners coming in from these business models:

1. Home or office based products and services

2. Industrial products and services

3. Mall based retail and services

4. Restaurants

Each owner picks their starting point in building their business portfolio to fit their experience, interests and resources at the time they start that previous business. The next step, though, may not fit the same model as the first because now that owner has a business that takes the majority of their focus, family demands may be different and life goals may have changed.

Our first step is to determine if the candidate will be liquidating any of their current portfolio and freeing up time to work on the new endeavor. A liquidity event may also contribute money to the new acquisition.

The biggest consideration is actually time. Business owners with an existing portfolio can usually access the growth capital they need, but they can’t buy more personal time. Whatever their available personal time availability will be, a plan can be built to enable the growth of a portfolio with the hours they wish to contribute. Much of what determines time availability is what kind of infrastructure the candidate built in the previous business.

For current owners of home based, office based or industrial businesses who may be actively involved in the ongoing daily operations, any business they consider adding to their portfolio will have to take their available time into consideration. In these cases we may be more likely Growing your Existing Franchise Portfolio George Knauf, Senior Franchise Business Advisor, FranChoice to consider adding a semi-absentee or absentee operation to their portfolio. Maintaining quality of life while growing your portfolio is critical. By finding business that are manager run from the outset we assist owners that are involved in another business grow without taking time away from their family.

Those that own semi-absentee brick and mortar operations coming in already have a manager run operation and with that a little more flexibility. In some cases they had a semi-absentee business first because they used it to transition out of their job. In that case they likely found that the semi-absentee business they had alongside their job is still semi-absentee when they become a full time business owner. Often the 5-15 hours per week that a semi-absentee business demands does not engage them enough and they want more time doing what they enjoy in business.

For these semi-absentee business owners we have a couple paths to consider, the first is to put them in a portfolio manager role where we accelerate the growth of their semi-absentee holding and they spend much of their time in site selection, construction and team oversight. Alternatively we could look at their professional career background and see if there is a business opportunity that would be more of a full-time endeavor, like our previous home or office based service franchise owner. While this may provide the sense of comfort of a full-time endeavor, it would be limited as the only business of this kind they could run. Most of our candidates when reaching this decision point lean towards the portfolio manager role.

Restaurant owners coming back to us are usually the candidates most focused on that portfolio manager role. Most restaurants are structured to be operator run at the single unit level, then to add units the operator typically has to build a very capable local infrastructure to handle growth. That infrastructure is often a corporate office, support staff, senior managers and district/area managers who oversee multiple units. Once that infrastructure is built their goal tends to be leveraging that as much as they do their personal experience.

Once they have an infrastructure built to oversee restaurants most restaurant owners focus the bulk of their efforts in that food space. We work first to understand any non-compete agreement they have and where their team has any particular skills then we tend to look at the growth opportunities in the restaurant segment. Restaurant operators tend to be very savvy in their segment and we tend see focus trending to the top three food categories: Burgers, Pizza and Chicken. Those top three categories account for the bulk of dollars spent in the fast food and fast casual spaces.

With owners that have been in the food space for a long period of time we are seeing a new trend for a simpler more streamlined business model. Often they have sold, or are planning to sell, their food concept if they don’t have a family member that will step in and take it over.

Moving their portfolio from food to simple semi-absentee may then be more of a retirement age timeframe quality of life move. They may be seeking fewer moving parts, higher more forgiving margins and businesses where a buyer would not be required to have the segment experience that buying an existing big brand food concept would require.

We have assisted countless business owners in growing their current portfolio or transitioning to a new game plan. The key in each case is a thorough evaluation of where you are and where you want to go. This may sound simple and like you can do it yourself, but regardless of experience we have found that the right professional asking the questions, looking for the gaps, strategizing the plan and acting as your sounding board can be very helpful.

Invariably one of the most important factors in that planning process is the owner’s time and what any new business would require of them. The right choice can make that new business a brilliant move instead of the most challenging thing you have ever attempted. Business owners rarely feel like it is time to stop growing, they also tend to be very bad at retiring. Find the right business for where you are today and plan well for the years ahead.

Mr. Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both startup and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.

Contact the Franchising USA Expert George’s Hotline 703-424-2980 www.FranGuide.com

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