The latest trend in franchising: multi-unit ownership

Mister Transmission will try out a new business model when it enters the repair market in London, Ont. later this year.

Randy Moore, president and CEO of the 50-year-old chain of transmission shops across the country, told Canadian Technician the company is looking for a single owner to develop three locations in London over the next two years.

“Whoever buys that market will buy the whole market,” he said. “We’re going to test our new model of having a multiple-location owner there. We’re absolutely certain it will work, for the simple reason that you get a different caliber of individual who’s looking at building three stores, rather than a single location.”

Moore said business people who are comfortable running a “mini-empire” of three or more locations tend to ask the “big-picture” questions like how many people live in the market, how many registered motor vehicles are there, what is the market penetration, what’s the strategy needed to capture that market, what kind of staff s needed, and how many locations.

“The thinking is completely different,” he said. “And it leaves the managers at each location with only one focus, and that’s the customer.”

Responsive Brands, the company that owns the 68-store Mister Transmission franchise, has been considering the new model for some time and Moore said it is ready now to get its feet wet.

“It’s a very smart strategy for some marketplaces,” he said. “That multiple-location owner has a network of resources. If an employee doesn’t come in to work at Shop #1, you take a guy out of Shop #2. If Shop #3 doesn’t have a particular part, you take it out of Shop #4. The synergies are greater and you actually lower overall costs.”

In addition, it reduces the incidence of one shop’s marketing dollars benefiting other shops in the same market. Franchisees in close proximity sometimes draft off each other, he explained, gaining the benefits of someone else’s hard work.

“It’s almost like they’re competing against each other – even though they’re both Mister Transmission shops,” he said. “If you have one person controlling all the shops in a particular marketplace, that owner’s marketing dollars go 100 per cent back to their own pocket. They’re not spending them to the benefit of their competitors.”

It’s a strategy that has not escaped the notice of FranchiseGrade a research firm that specializes in assessing North American franchises. FranchiseGrade recently posted an article on its website entitled, “Is Multi-unit Franchising The New Norm?” It reported that the demand for multi-unit franchising has been increasing lately and “by all accounts it is here to stay,” with 52% of all franchises now owned by multi-unit operators.

You can read the article at http://www.franchisegrade.com/index.php/2014/02/14/is-multi-unit-franchising-the-new-norm/

“If you look at the future of the automotive repair and service business, we can’t continue to have single stand-alone locations and continue to pay today’s costs and overhead. And the answer is not necessarily larger facilities. A 10- to 12-bay shop is a very expensive operation to run,” he said. “Besides, the law of distribution states that you can only draw customers from a certain geographic market. It’s much better to have three shops five kilometers apart.”

Mister Transmission would like to slowly convert all of its key markets to multiple-location owners.

“That means we would need some franchisees to step up, and convince the others in that market to step out,” he explained. “Obviously, we would prefer to work from a position of encouragement rather than enforcement.”

The company is also looking at expanding in other ways, including through “satellite operations” that would service smaller towns close to larger markets.

“A satellite store wouldn’t be a full five-bay location. Maybe it would be a two-bay operation with service techs and re-and-re, but the actual transmissions would be build in larger stores in communities nearby,” he explained. “It’s a strategy to grab extra marketshare, expand into smaller marketplaces, and gives the opportunity for some of our bigger stores to add volume without putting up more bricks and mortar.”