The franchising industry has undergone many changes since the concept took off fifty years ago, and one of the biggest changes is the opportunity for multi-unit ownership. This is where the franchisor grants a franchisee the right to operate more than one outlet within a defined location. With this right comes the potential for serious money making as well as increased responsibilities in operating your businesses.Franchisors have high standards in regard to granting multi-unit rights. You must have a proven track record of successfully managing a business, with the ability to motivate your staff and continually seek performance improvement. If you already own a franchise, you must make a convincing argument to support your application to own multiple units. You must do the same exhaustive research about your market and competition for each unit, and expect to pay start-up costs.
Factors to consider:
- are how well equipped
- is the franchisor to run multiple units within the same territory, and
- how successful these units are.
- Does the franchisor have the capital and resources to support multiple units in the area
- Then you must make a strict accounting of your own finances, just as with your initial franchise purchase.
You may have opportunities to buy existing franchises from either a franchisee or the franchisor. Often you can get a discount on these sales, and since it is an existing business, you can examine all the records for sales, costs, and profit margins to make an informed decision. A franchise unit that has changed hands repeatedly probably has problems, and you should take extreme care in reviewing its history for several preceding years.
Another means of expansion in franchising is to acquire a Master Franchise License. This puts you in charge of other franchisees within an established territory, which could be a county or a country!
A Master License requires a significant investment, but offers tremendous rewards in return. With the Master License, you have the power to appoint and train new franchisees, and the right to collect a portion of the fees these franchisees pay to the franchisor. You will essentially be creating an ongoing income stream.As with buying an individual franchise, you will need to do extensive market research before making an investment in a Master License. And just as with the Franchise Agreement, you must carefully scrutinize all the terms so that you fully understand your obligations and rights as a Master Licensee. Be sure the territory is carefully defined. Consult an attorney experienced with licensing contracts. Expect some of the franchise units to flounder, and be prepared to step in to help run the operation.
In addition to Master Licenses, one can also purchase the right to be an Area Developer. In this case, the franchisor enters into an agreement with an area developer to sell a specified number of franchises in the area within a specified time. Area Developer agreements are not common in the U.S., but tend to be used more for international expansion.
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