Multi-unit franchising is on the rise in the U.S. Take a look at these statistics compiled by The Wall Street Journal:
- Nearly 88 percent of multi-unit operators are in one brand
- Just over 16 percent of female franchisees own more than one unit
- Just over 20 percent of male franchisees own more than one unit
- Multi-unit operators now control 54 percent of all franchised units
- Of these multi-unit operators, 52 percent own two units while 17 percent own three
Multi-unit franchising is when a franchisor awards a franchisee the right to operate more than one outlet within a defined territory. If run successfully, a multi-unit operation can be a lucrative partnership between a franchisee and franchisor.
One way for franchisees to move into multi-unit ownership is to do it gradually by starting with a single outlet and gradually developing a network of outlets.
Taking on more staff and investing in new locations must be justified by more than achieving good profits in one location. To expand the franchisee must prove that an additional unit would not damage the number of people going to the franchisee's other unit(s) in the area.
Another way to become a multi-unit franchisee is by becoming an area developer.
All franchisors have a set of standards they require of incoming franchisees. However, in the case of area developers franchisors will often demand a higher standard before they agree to allow someone to immediately become a multi-unit franchisee. They are usually looking for a proven record of achievement in a management role, and the ability to motivate and improve a large staff. Franchisors will also be looking for franchisees with advanced market knowledge of their area.
Before entering into an agreement for multiple units, those with the ambition to become a multi-unit franchisee must do their research properly. Here are some tips to successful multi-unit franchise ownership:
- Take into account the business structure of the franchisor and examine how successful it has been in areas where multiple units exist. Also, does it have the capital and – possibly more importantly – the resources in place to handle multi-unit development?
- Pay attention to the fee schedules and resources offered by franchises. Does the franchise have technology that will make things easier for you such as point-of-sale systems that communicate with each other? Is the franchisee fee discounted more additional units? Is training limited or does it scale with how many units the franchisee opens?
- Hire top talent. You can’t be everywhere at once so it’s important to have a strong management team to support you. Also, take inventory of your own skills and pay special attention to the gaps in your experience when hiring.
- Only expand when each unit is functioning properly on its own. There are times when certain locations will outperform others, but if one or more of your units is draining resources from another it may lead to problems sustaining the whole system later on.
- Find a support group of other multi-unit franchisees. Most franchise systems are set up to franchisees that own one or two units. Having a group to network with about the special issues multi-unit franchisees face can help smooth out the journey.
- As with single unit ownership, maintaining open communication with the franchisor is a key to success.