What successful franchisees look for when making an investment
Rylan Miller shares his secrets for success as a 40+ location franchisee – and counting.
KEY TAKEAWAYS
As a successful multi-unit franchisee, Rylan Miller grew his Tropical Smoothie franchise business from a single store in 2016 to 40 locations as of April 2023.
Whether you’re a franchisor or franchisee, franchising success depends on factors including a growth mindset, good business acumen and a humble attitude geared toward learning.
By knowing what to look for in a franchise investment while focusing on ongoing education, multi-unit franchisees can thrive in a highly competitive industry.
When it comes to growing a franchise business, new and emerging franchisees often wonder what it takes to expand to multiple locations successfully.
For Rylan Miller, a U.S. Navy veteran and former military contractor who operates 40 Tropical Smoothie locations across multiple Southern states including North Carolina, South Carolina, Virginia, West Virginia and Georgia, in addition to investments in Trust Thy Barber - a boutique barbershop concept - and other franchise brands, the secret to success as a franchisee is flexibility – and having the right mindset to meet any challenge as it arises.
“Evolution is probably one of the biggest things [for franchising success]. And that's easy to say, I suppose. But if you're focused on your plan of action now, be ready to change that plan of action in six months,” Miller says.
To make sure you’re ready to pivot as a franchise business owner, it’s critical to have the tools and mindset to grow the right way. Read on to learn about Miller’s secrets for franchising success – and discover ways to take your franchise business to new heights as a multi-unit franchisee.
1. Know what to look for before investing in a franchise
Although achieving success as a multi-unit franchisee is a long-term investment that can require years of hard work and dedication, the process starts before the first franchise agreement is signed. By knowing what to look for in a franchisor, prospective franchisees can make wiser investments that align with their values and personal goals – and increase their chances of growth and profitability over the long run.
“We want to look at the sales volume. What [is the franchisor] doing in terms of sales, the cost of entry and what that return is? Just cash return-on-investment,” says Miller, explaining that he typically looks at a brand’s most recent three years of financials when evaluating a franchise opportunity, although that duration has “crept up” in recent years due to an increase in construction prices.
By making sure a franchisor’s Franchise Disclosure Document (FDD) contains strong Item 19 financial performance disclosures, prospective franchise buyers can get a clearer picture of what they’re investing in before committing – and determine whether or not their investment will be worth it.
In addition to sales and financial performance, Miller advises prospective franchisees to carefully consider initial franchise fees before investing in a franchise business – whether it’s their first or 40th unit. By making sure the numbers make sense, franchisee candidates can ensure better returns on investment that won’t leave them financially burdened or struggling to turn a profit.
“Those initial franchise fees get expensive. What are you really getting out of that? It's a business, at the end of the day,” Miller says.
In addition to initial fees, royalties and other fees are key items that franchisees should also evaluate in the FDD before making a franchise investment.
“In some ways, the franchisor and franchisee are diametrically opposed. [The franchisor’s] business model is based totally on sales. They can tell you that [they] care greatly about your profitability, and that may be true, but the business model needs top-line sales to get royalties. As a franchisee, I care about net profit. Those two things are on the opposite ends of the spectrum in terms of [profit and loss], so you need it all to work,” Miller says.
2. Have a business mindset focused on profitability and numbers
Whether you’re a franchisee or a franchisor, having the right mindset is everything when it comes to franchising.
Because of that, exercising sound business judgment before investing in a franchise opportunity is critical. By ensuring that a franchise offering is designed to set franchisees up for success from the beginning, candidates can increase their chances for successful growth within the franchise system further down the road.
To determine whether a franchise opportunity is growth-oriented, Miller advises looking for a few key factors including a strong operations manual and a franchisor that knows the ins and outs of their business and industry.
“Have a really good pathway and template for profitability. So, know exactly how your P&L works and operates – meaning we know, to the hour, the number of people that we bring on shifts, based on sales volume. Know exactly what your labor is going to be,” Miller says.
Miller also recommends making sure an inventory process is put in place early on – something that can increase profitability for new franchisees and franchisors alike over time.
“You'll benefit from better profitability long term by inventorying your food and waste whatever else you have there – maybe just retail, but have an inventory system that allows you to really fine-detail manage your inventory and allows you to really have a small spread as a variance from your theoretical versus actual cost of goods,” Miller says.
3. Look for franchisors that incentivize growth
For many franchisees, growing a franchise business from one location to several – or even many – is a major goal when starting out in the franchise industry. For franchisees that aspire to own multiple units, working with a franchisor that offers incentives for growth can be a gamechanger.
“Just thinking about this as a franchisor – putting a franchisor hat on – if I went to my existing franchisee base and said, ‘Who wants to grow?’ If half of them raise their hand, I corner those half and say, ‘If I gave you a discounted rate on a franchise agreement. … I'll incentivize you to grow this,’ I think you'd get even faster growth and then collect royalties,” Miller says.
Before investing in a franchise business, it can be a smart idea to talk with the franchisor about growth opportunities early on. Be on the lookout for franchisors that offer discounted rates for multiple units, offer additional support or provide other incentives that encourage growth and can help ambitious franchisees achieve their goals of becoming thriving multi-unit franchise business owners.
4. Stay grounded - and rooted in education
Like most things in business, when it comes to achieving success as a multi-unit franchisee, having the right attitude is everything.
“My approach has always been approaching things as a student and trying to be as humble as you can,” Miller says.
By admitting when they don’t know something as a franchise business owner and making an effort to learn about that subject – or correcting mistakes as they learn to do better – franchisees can build a foundation of knowledge about their industry while strengthening their business over the long term.
“It's like doing a hard workout in the morning – the rest of your day is gonna be okay. But it also teaches a little bit of humility, right? Just being humbled knowing that there's always somebody better, and always somebody bigger. There's always somebody faster, stronger, smarter. And being humble about that – always having that student hat on and approaching things like you don't know everything – that's for me,” Miller says.
For Miller, humility – along with a little bit of luck, a supportive family, and a lot of patience – are the secret ingredients for success as a franchisee.
“There's nothing special about what we're doing here other than the simple basic stuff. Being humble and being a student – all the time, learning,” Miller says.
