Partner at Franchise Management and member of the College of Experts of the French Franchise Federation (FFF), Olivier Mignot has been helping networks to grow for thirty years. Here he shares his advice.
According to Olivier Mignot, the multiplication of sales outlets is highly beneficial for the franchisee. Provided you centralize a certain number of functions, integrate an ad hoc financial logic and enhance the value of your assets.
When can a franchisee consider opening a new unit?
Olivier Mignot: Let’s start with a little vocabulary. Multi-franchising involves creating several points of sale under the same brand name. Pluri-franchise involves opening commercial entities under different brands, but which generally belong to the same group. Both are recent phenomena.
Until five years ago, network heads considered that their associates should devote themselves to a single outlet. With the scarcity of franchise applicants – linked in particular to the fall in unemployment – they have changed their strategy. Brands now support multi-franchising. All the more so as studies show that this model is more profitable for them.
The emergence of multi-franchising can be traced back to the health crisis and the desire of some entrepreneurs to diversify their portfolios. In both cases, success depends above all on the franchisee’s solid skills.
What are the issues to consider when adopting these commercial operating systems?
It’s important to have a sound tax strategy, while at the same time maximizing the value of your assets. With this in mind, it is advisable to set up a holding company, so as to be able to gradually sell off your assets when you retire.
I also recommend recruiting an assistant when you have at least three stores. McDonald’s, for example, recommends this as soon as one of its associates owns two restaurants. And some brands make it a condition precedent to the franchise contract.
How do you decide between multi-franchise and pluri-franchise?
It all depends on the situation. We are currently working with an entrepreneur who has opened five temporary employment agencies. He has chosen to diversify into recruitment, which makes sense in terms of business strategy.
My advice would be to start a multi-franchise approach and, once the territory is well meshed, to diversify. It’s important not to spread out geographically, so as to centralize a number of logistical tasks, pool communication costs and make group purchases.
What are the points to watch when drawing up a contract?
First, it must specifically authorize the opening of several stores. Some chains, for example, require their first outlet to be profitable before opening a second. It is then necessary to examine the financial conditions for extension, particularly concerning the entrance fee. There is no reason, for example, to pay again for the mandatory training initially required.
Finally, it’s important to talk to other entrepreneurs who have crossed the Rubicon. Their feedback will be particularly useful to you.
