Understanding multi-unit franchise operation is primary to running multiple franchise businesses simultaneously and successfully. Franchising, which has been an attractive business opportunity for some time now, allows this leverage of replicating models for massive scaling. Franchises extend well-thought products or services with foolproof marketing strategies, creatives, plans, executions, and campaigns required to promote sales and revenue. It doesn’t ask the franchisees to not put in their efforts, yet everything comes on the plate; all the franchisees have to do is cater to the targeted audience in the designated manner. Financial institutions are more than willing to offer loans and support to these well-established holdings rather than small startups.
Of late, multi-unit franchising has caught the attention of franchisees. With new possibilities, the franchisees can hold more than a single franchise unit, which has opened up new opportunities in the US. According to the Wallstreet Journal:
- Over 58% of all franchisees are Multi-Unit owners
- Around 52% of the Multi-Unit Franchise Owners own two units, and 17% own three units
- About 88% of the Multi-Unit franchise owners have holdings in a single brand.
- Precisely 17% of women entrepreneurs own more than two franchises of two different brands.
A Multi-Unit Franchise is one where a franchisee purchases or is awarded the right to ownership of more than one franchise unit, typically in a single territory for a definite period. This gives the franchisee some benefits regarding the franchise fees, revenues, etc. At the same time, it also barres the franchisors from developing any other franchisee to open a unit within a certain range to avoid a clash with the estimated revenue.
How does a Multi-Unit Franchise Operate?
In today’s technology-driven result-oriented franchise world, it is not an understatement to say that the business class is multitasking to incur more profits from any possible sources. So when doing a single franchise unit, why not involve more than one franchise unit. Handling a Multi-Unit Franchise system is profitable to both the franchisor and the franchisee. The franchise gets some discount in franchise fees and the issue of a ‘development schedule’ as a part of the franchise agreement where the franchisor agrees not to open another outlet in the same or nearby location under some perimeter for a certain period to avoid a clash.
Although there is hands-on involvement of the franchisee required, since multiple locations are involved simultaneously, opening the stores/work locations comes with a good skill-packed team, technology-backed upgraded system, and fully managed hierarchy under the franchisee. This leaves the franchisee with a better work-life balance. These kinds of investments are well suited for the investors to like to keep their full-time jobs and want to invest in the franchise market.
Multi-Unit franchises come in two aspects. Either the franchisee can opt to take up more than one location, preferably in one territory remaining in one brand, or take up multiple brands on the same horizon. For example, one can take up multiple locations in South Carolina for Rush’s or diversify franchises as few into automotive, plumbing, and similar.
Ultimately, the aim is to multi-unit. And that requires huge funding.
What are the Pros of Multi-Unit Franchising?
- Being a part of an effective business system does not just give support but stability to the business.
- Multi-Unit doubles up the revenue. Rather than just fetching revenue from one unit, it can sweep up from multiple units.
- With advanced technology, the work gets easier, and less franchisee involvement is called for.
- Since multiple units are set up, a larger team is set up to handle and manage the units and distributed by the franchisee to reduce their hands-on involvement in every bit and piece, which gives them their personal space.
- Multi-unit Franchise Agreement comes along with a ‘development schedule ‘that confirms that the franchisor would not permit the allocation of any other franchisee within a certain perimeter of that territory which will clash with the revenue of the multi-unit franchisee for a locking period of one and a half years.
- It comes with a higher resale value.
What are the Cons of Multi-Unit Franchising?
- They come with high risk and high investment.
- The minimum asset value of the franchisee must be at least $300,000 since that is the setup cost for two units, let about more than 2 units.
- For Multi-Unit franchising, people usually think about doing in partnership, keeping their regular jobs alive, and investing in the businesses seems like no harm in the beginning. But when one partner withdraws in the long run, and some mishap happens, it’s seeingly harsh on the whole bunch.
- Profitability in the multi-unit might take a little longer to attain since the break-even is also higher.
Acing in big markets big businesses is by taking calculated risks. No one has ever been successful by taking no risks and acting as a menace. So before diving straight into the deep franchise ocean, even if you have the funds, consult with those who have been in the industry and have been multi-unit franchising for years and have just started. Examine their experiences and decide for yourself.
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