The 4 Systems You Need Before Opening Your Next Location
Opening a second, third, or fourth location is exciting! However, most Franchisees who are ready to grow are not organizationally prepared for that growth, which can reduce their chances of success.
- Franchisees and entrepreneurs need to have four systems in place before opening their next location to be able to manage all of them successfully.
Those four systems are the system of Lead, the system of Staff, the system of Profit, and the system of Scale.
This blog post will explore each of those systems so you can assess whether you have them in place to increase your success rate. And if you don't, analyze what you can do to get yourself and your organization ready.
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What is a Franchise Business System?
Before we start, you must understand that a system is a set of processes, each with a number of procedures within, as well as policies that define the activities of that system.
So, when we refer to a system, we mean everything that’s inside it: all the processes, procedures, and policies that make up that system.
System #1: Lead
The System of LEAD includes everything you need to, first of all, develop yourself as a successful leader who inspires your team to do great.
You also need a system to develop other leaders, because once you go multi-unit, the business should not depend on you. You must train the leaders who will run your organization on your behalf, and the only way to do that is to have those processes in place.
What kind of processes? Among others:
- The process to hire the right people.
- The process of training and developing them to be the managers and leaders you need them to be.
- The process to provide them with growth opportunities as your organization grows.
Implementing this system requires intentional focus in your organization, and it’s crucial not to overlook its importance.
If you don't have the Lead System for developing leaders in place, other systems won't matter, because growth will be chaotic, since things will continue to depend on you.
I remember working with a Franchisee who had the money, the desire, and the excitement to open more units. He even had a really good eye for finding locations, but his ability to develop leaders was not there. He didn’t have Managers for the new locations or District Managers to supervise his multiple units as he continued to grow the enterprise, and he was really frustrated because this was holding back his scalability.
Even if your skills and strengths are in other areas, such as development or finance, you still need to develop the future leaders of your organization, at least until you're able to hire a Director of Operations to do that for you.
Ask yourself: Do you have those skills, or at least the minimum necessary skills, to identify and develop those leaders, develop yourself, and prepare for the growth your organization is about to experience?
Don’t miss: Are you Ready to Become a Multi-Unit Franchisee?
System #2: Staff
The second system you need to have in place to be able to grow your organization is the System of Staff. This includes not only the franchise leaders, but every position in your company and every team member that you need to run your operations properly.
Each person who joins your organization goes through the eight phases of the employee life cycle. These phases, which, by the way, are also staffing processes, require procedures and policies that must be defined and documented so you or your managers can consistently repeat them.
What are those eight phases?
- Recruiting: All the procedures that will help you attract the right people and have enough candidates to choose from.
- Interviewing: A clear procedure on how to interview the people you are recruiting, so that you can select the very best ones.
- Hiring: The way you offer a job to the best candidate will shape how the employer-employee relationship is going to be. This is a very important phase that many business owners simply skip.
- Onboarding: You need the correct procedures to onboard your team members, because this determines how they feel about joining the company from day one. Do you want them to be happy or sorry that they accepted the job?
- Training: All the procedures of how you provide the employees with the knowledge they need to feel capable and confident at their job.
- Motivation: The processes and procedures to motivate the people.
- Disciplining: When they derail, what is the process to bring people back and change their behavior?
- Separation: If you are unable to correct their paths, you need a clear process for separating employees from the organization while maintaining respect and a positive image of your organization.
As you can see, it is critical that you define all processes, procedures, and policies for the Staff System before opening your next location. That way, your leaders will know how to execute all these staffing stages without you being present at all times.
System #3: Profit
You invested in a franchise, but the franchise by itself doesn’t guarantee profit. The Franchisor gives you a proven brand that will bring you revenue, but the System of Profit is where you establish the processes and procedures that your team members and leaders will follow to manage the business and make it profitable. Otherwise, how will you scale your organization?
This system must define how you manage:
- The labor costs
- Your cost of goods (COGs)
- Maintenance
- Waste
- Other key performance indicators (KPIs) in your business
Do you have a process and a procedure to monitor these elements? Are your team members and leaders clear on what they have to do to ensure maximum profitability?
Also, do you understand your financial statements and use them not only to pay taxes but to make the best business decisions? If the answer is ‘No’, you may be missing opportunities to make every unit profitable.
System #4: Scale
The last system you need to put in place before opening your second, third, fourth, or 20th location is the System of Scale. And these are the processes, procedures, and policies you need to scale to a multi-unit organization.
This system will help you determine when to hire a District Manager, what they should do, how they should do it, and how often they should do it. Also, how to best open new units and what to look for when acquiring an existing location. It will also give you clarity on when to bring external services in-house, such as accounting and maintenance, to improve your costs.
These are the type of decisions that you need to make when you have a scaling system. If you don't, you may be growing too quickly or spending too much on overhead, which can cause your company to crash.
I know of a Franchisee who did that. Coming from the corporate world, he was used to having a big office, with an executive assistant and all kinds of people working there, but he ran out of cash before he could open the units to cover that overhead.
The Scale System will help you avoid that mistake and make sure you can be profitable right from the start.
In case you missed it: 11 Benefits of Scaling to a Multi-Unit Franchise
Test Your Organization!
How can you tell how good and strong your systems are? The test is very straightforward: leave your company for 30 days.
I know some business owners panic at the idea of being gone for a weekend, let alone a whole month. But I want you to think back. If you were to be gone for 30 days, what would break first? What would break second, and what would follow in the avalanche? That will give you a pretty clear picture of where your franchise business systems are and what you need to work on.
Financial qualification does not equal organizational readiness. You may have all the money in the world, the desire, and the excitement. But if your organization is not ready to scale, please don’t scale, as it will only multiply your challenges and issues and add more work, not more profitability.
The biggest mistake growing Franchisees make is opening a second location when the first one still depends on them. That decision just makes their lives much more difficult! Plus, it also impacts the business, since it won’t be as successful as it would be with only one location.
Another way to assess where you are with your systems without adding stress to your company is to take our Multi-Unit Readiness Score. This is a short, free quiz that will help you assess whether your organization has some of the items and elements you need to have in place before you grow multi-unit. I’m sure the results will open your eyes and help you understand where you are at this point.
And, if you'd like to learn more about how we can help you put in place those franchise business systems, define them, document them, and train your team on them, explore our COMMAND Program! In this program, we help Franchisees develop all the systems, processes, procedures, tools, and everything they need to grow with confidence and success.
Reflections:
- How clearly documented and well-structured are all of your franchise business systems?
- Do your leaders know how to implement these systems properly?
- Is your organizational infrastructure ready to support growth?
- What are the potential consequences if you were absent from your business for 30 days?
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