Opening more than one franchise location can be beneficial to a franchisee’s business plan and financial goals. However, making a decision to operate multiple units is not one to be taken lightly. The following are a few things to consider when deciding whether to take on multiple unit franchise ownership:
Pros of Owning Multiple Franchise Units
Generally, a franchisee’s first location is the hardest. There is a learning curve for both the franchisee and franchisor, funding can be harder to secure because you are not yet established, and the business must be built locally to meet the brand standards. However, after the first location is open, a second (or third, or fourth) location is often a bit easier to handle. Specifically, funding is typically easier to obtain because you have more experience and stability. Additionally, after just having set up a new location, you know what pitfalls or successes you had and can avoid (or encourage) the same things happening again.
Another major consideration for multi-unit franchise ownership is the ability to bring on more staff. Generally, when running a single unit franchise, you are still going to be very hands on. But as locations grow, the team can too. Many franchisees see multi-unit franchise ownership as a chance to actually be able to step back and hire a General Manager or other assistance so they can focus on more big picture items for their business. This allows the business to provide more job opportunities for the local community while also giving the owner a chance to step back and trust their business and team to work. Expecting to be able to run all locations by yourself is unrealistic, so expanding with a team is crucial to your success as a multi-unit franchise operator. At the end of the day, however, you still own the location and you will be able to step in and help direct as needed.
Depending on the business you choose to franchise, there may also be certain financial benefits to multi-unit franchise ownership. Some franchises will offer discounts for multiple units being developed and purchased at the same time (or even subsequently). As you invest more in the business, the franchisor is also investing into you. Seeing commitment and success from your locations may encourage a franchisor to allow you to purchase more. Of course, as your locations develop, more opportunities are available for you to increase your royalty profits (or whatever your agreement states). By entering into a multi-unit franchise, you are showing that you are committed to the brand and mission long term – you become more investable and important to the franchise company.
A final positive of multi-unit franchise opportunities is the chance to diversify your investment portfolio. By having ownership in multiple locations or various franchises, you’re creating more opportunity in your portfolio for success. This is a chance to cross markets among localities for a chance of increased profitability.
Multi-Unit Risks in Franchising
Although there are many positive reasons to choose multi-unit franchise ownership, it is important to note that the risk for a franchisee’s return and investment is higher the more units they own based on more capital deployed. Additionally, if you are planning to jump right into multi-unit franchise ownership at the beginning, your initial investment and set-up costs will be higher as you are opening more units in succession. Typically, franchisors require one or more units to be opened per year over multiple years - it may take longer to see success financially because of that. Of course, it is also important to note that more units will require different skill sets to manage properly as you will need to rely on local managers to operate the locations. As with your first location, everything must satisfy your agreements, the businesses’ standards and training, and be marketed for.
Conclusion
While there are certainly many reasons to consider multi-unit franchise ownership, the decision comes down to the amount you are willing to invest and your commitment to the brand long-term. Taking on additional locations may provide additional revenue as long as each location is operating successfully, but they will also require additional work, oversight, team members, and operating costs. In most cases, it is important to grow these units slowly to ensure your success and investment is optimized. Nevertheless, multi-unit franchise ownership can be a wonderful entrepreneurial journey with the right franchise and team around you.