Dan owns 6 education franchises.
His first 4 crush it. Great cash flow.
Then he bought 2 more that aren’t making any money
Now he’s got more work & stress for less money
Should he downsize, selling the underperformers to focus on the profitable ones?
I’ve thought about this many times in our Midas business.
Here’s what I’ve learned:
There’s a zone between 5 and 8 stores where you get the headaches of scale without the benefits.
Dan already built the right team.
He has 2 leaders helping run the 6 stores.
That’s a 1 to 3 ratio of multi-unit support to stores.
Many retail franchises target a 1-6 ratio.
This means he can expand to 10-12 stores with the same corporate overhead.
All the new store profits should drop straight to the bottom line.
Once you’re there, the business gets exponentially easier.
You can absorb fluctuations.
Sometimes the new stores take time to hit their stride
When the business is smaller, it’s hard to stomach
As you get bigger, it’s easier to have more patience
One of my locations lost $29,000 from September 24 to March 25.
We were seriously considering closing the location since our franchise agreement & lease were close to renewal.
Then we made another store manager change
In April, we made $26,500, which almost recouped the entire loss from the previous 7 months
Now we’re humming around $20,000 per month profit
During this same time, we’ve had other locations that were making $20,000 per month DROP to barely making money.
Running a multi-unit business is a rollercoaster on an individual store-level basis
The bigger you get, the smoother it becomes.
My advice to Dan was not to downsize, but instead to double down
Are there locations that are likely to fail, and should you consider selling them?
Yes — not every location is viable.
But make sure you exhaust every possible first
Cheers!
Brian
P.S. This discussion happened on my live Cash Flow Club Q&A call. Join the Cash Flow Club to attend the next live Q&A call, PLUS a weekly email sharing insights on building an 8-figure franchise business.
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