Multi-Unit Franchising Feature
What is better than owning one franchise? Owning multiple! A trending investment strategy in the franchising world is multi-unit purchasing. What was once only an option for veteran franchisers, the idea has expanded to a wider audience because there is less of a risk and more preparation.
There had been significant growth for multi-unit franchising, with multi-unit operators now controlling over 50 percent of all franchised units, according to the International Franchise Association Education Foundation.
Single-unit franchising was once the only option for most people. Those looking to start their own business would invest a lot of their savings into one business option that was safe and a guaranteed success. The multi-unit option was less likely for individuals because sometimes an initial higher investment had to be agreed upon at the beginning of the process. However, some franchises have a lot of different signing options and opportunities. Now one could gradually gain ownership of more units as they build profit, but the argument to extend must be beneficial to the franchisor. Though one unit is successful and the numbers are great, location, territory, population, and needs assessment must be taken into consideration. For example, you wouldn’t want to lose your customers in one area to fulfill another.
One can determine their choice to multiply after they have garnered enough profit or one might want to expand their unit into different areas. For example, a day care may turn into a multi-unit by adding a tutoring franchise, while some fast-food restaurants have capitalized on locations and are set up side by side in the same building. That being said, nearly 88 percent of multi-units are in one brand, which could be a sign that staying within the same brand is easier and has better results.
Another means to become a multi-unit owner is by becoming an area developer – meaning the franchisee owns and operates a region, and is responsible for the units within the area. This type of agreement will have a long-term plan specific to that region with intended numbers of locations, areas within the territory and at what point each franchise will open.
Multi-unit is now a way for franchisees to see their worth and grow in a realistic and manageable way. Though a lot of individuals consider franchising as an opportunity to create work-life balance, a single-unit franchise allows for more hands on control. Once you enter the multi-unit franchise, your ability to dabble directly on the ground will be limited due to time constraints. Taking time to self-reflect on the business needs at a personal level is important before taking the plunge. Would you rather be directly involved in the operations on location or would you rather use your time to manage the overall business in a multi-unit manner?
A franchisor may have demands from the franchisee as well. Taking on a lot of franchises could be a lot of work and a risk for the franchisor as well, therefore they may expect a franchisee to have experience, education or other criteria before passing over multiple keys.
Review the expectations of a franchisee before investing in any franchise – though you may not see yourself owning more than one unit, multiple units could be more realistic down the road. It’s best to know what your options for growth are before your initial investment, in case your visions become bigger with time.
Beneficial for Franchisors
Multi-unit industries are beneficial to franchisors as well – it’s hard to manage multiple franchisees. A person in charge of one region who is well-versed in the brand, operations, expectations and needs of that particular franchise, as well as the community, makes the job of a franchisor a lot easier. Sometimes supporting and managing multiple single-unit owners can be a time suck and exhaustion.
Franchisors can relax with a well experienced multi-unit operator in the field – it leaves more headspace when you can rely on someone you trust. Plus, with fewer people to support, the time with franchisees is time well spent.
A common type of multi-unit franchise is the food and beverage industry. It’s typical to see coffee shops littered throughout most major communities across America. These types of business have multiple customers at many different times during the day.
An assessment of the area is important before even considering reaching out about a multi-unit partnership. If there are successful small businesses that offer the same services, it might not be a great idea to start something so competitive. Have a general understanding of the community and how they shop – would they be more dedicated to a familiar brand or prefer to shop local?
That being said, a multi-unit agreement in the food and beverage industry is likely the safest investment. Franchisors have perfected this process and can pretty much template out the expectations and needs for success.
A background in food management would be a helpful asset, but manager experience or expertise in any customer service industry would be beneficial.
The food industry has a lot of options, consider a service that you’d enjoy pursuing as well as one that appeals to the territory you hope to run. Is this a service and product that could be multiplied many times within your region?
Some new and successful restaurants may consider franchising for the first time as a multi-unit option, so review the area and see what options are available within your preferred territory, or if there are partnerships you would like to create.
Though one might be excited and have the capital to invest in multi-units, if you do not have the experience and knowledge to run more than one business successfully, it’s not as simple as it looks. Without relevant expertise, tread lightly but with high expectations. Ask franchisors about future options and where the opportunity lies.
For those confident in their abilities and a background in managing multiple projects, research your target, region and competition. Then review your personal needs and desires when running a multi-unit industry; make sure they both match up. Ask franchisors if you can work your region as a whole unit, grow outside your region, work in different brands, access all capital for different placements.
For example, one franchise is having a down turn due to outside temporary factors: weather, construction, staff turnover, etc. Can you maneuver money and people within your region to bring success to more accessible and functioning locations?
There are a lot of hypotheticals that could be considered before taking the plunge, and whether a veteran or rookie, it’s worth trying to consider as many as possible.
Multi-unit franchises were once a game that only professionals with a lot of capital had access but now it’s anyone’s game. Depending on the franchisor, the region, the expectations and support, multi-unit franchises could be the investment that is best for everyone involved.
ABOUT THE AUTHOR: After receiving an English Degree, followed by a Journalism Diploma, Gina Gill became a freelance journalist in 2008. She has worked as a reporter and in communications, focusing on social media. She currently works as a community information officer with Epilepsy Society, while pursuing her writing career at the same time.