Whether you already own a franchise or you’re thinking about buying one, you may be wondering: is multi-unit franchising for you? Buying multiple units requires a significant investment, so it’s a good idea to first take a close look at this model.
What is multi-unit franchising?
Multi-unit franchising has increased in popularity over the past few decades. With this ownership model, a single franchisee owns and operates more than one unit, traditionally within the same general region. Frequently the owner buys multiple units and begins by opening a single unit, before eventually opening the additional locations. Multi-unit ownership offers an excellent opportunity for growth and wealth creation.
Your role as an owner will differ according to whether you own a single franchise unit or multiple units. Owning a single location often means you’re on site at one store every day and essentially serve as the manager. A multi-unit owner, while still involved full-time, focuses instead on scaling the business and “bigger picture” strategy and operations. As a multi-unit owner, you’re more likely to hire a manager to run the day-to-day functions.
Advantage: Stability
With respect to growth and performance, your chance of success increases with multi-unit ownership. Your overall results will be more stable because they won’t rely solely on the performance of one store. For example, a downturn in one location could be balanced out by increased business at your other sites.
Advantage: Economies of Scale
Multi-unit ownership enables you to lower your cost per unit because fixed costs are shared over multiple locations. These economies of scale can apply to expenses such as purchasing inventory, marketing, staffing, and training, making the business more profitable and efficient over time. This is especially true in low-margin industries.
Advantage: Potential for Higher ROI
Given cost savings, reduced expenses, benefits of economies of scale, and a higher probability of success, multi-unit franchise ownership can generate a higher Return on Investment (ROI).
Advantage: Increased Influence
Typically, your influence within the franchise system will grow when you own multiple units. The franchisor is more likely to take notice of your feedback and needs.
Thinking about multi-unit ownership?
Keep in mind that a bigger initial investment means more risk early on, although it will eventually be spread out among multiple locations. And while multi-unit ownership can ultimately be more profitable, it can involve a longer ramp-up period. There are different ways to go about multi-unit ownership. If you commit to opening multiple units right out of the gate, be sure to carefully consider the financial investment and time commitment required.
Both single and multi-unit franchising offer opportunities, challenges, and rewards to those willing to commit the time and effort to be successful. Is multi-unit franchising for you? Deciding which path suits you best ultimately comes down to assessing your personal goals and capabilities, finding the right franchise, and making an informed decision.
To find your best match, contact a FranChoice consultant to assist you through the process.