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As you search for a franchise to own, one of things you need to decide on is size. In this case, the size of your potential business.
For instance, are you interested in one franchise location, or do you see yourself owning multiple franchise units?
In this post, I’m going to talk about multi-unit franchise ownership, and why a lot of today’s prospective franchise owners are attracted to it.
Multi-Unit Ownership: Revenue Possibilities
Multi-unit franchising, for some, can turn out to be a winning business strategy. That’s because owning multiple units of the same franchise concept can bring in serious revenue.
For example, if you own five franchise businesses that are bringing in $350,000 a year in revenue, what you really own is a $1.75 million business operation. Not bad. And if 10% is going to your bottom line, that means you’re making close to $200,000 a year.
Can you see why multi-unit franchising is attractive?
Investment Amount
If you want to become the owner of multiple franchise units, your upfront and ongoing investments are going to be higher than if you purchased a single franchise business unit.
Specifically, whatever your investment for a single franchise unit is, you need to multiply it by the number of units you’re interested in owning.
For example, let’s say the total upfront investment for a single franchise unit is $175,000, but you’re interested in owning five of them.
Now, you’re not going to be required to open all five franchises at once, as that would require a $875,000 investment. But you will be required to pay five franchise fees.
In addition, there will be ongoing costs for every franchise unit you own.
Things like, payroll costs, rent, inventory and more.
Ex-Corporate Executives Really Like Multi-Unit Franchising
There’s a reason that multi-unit franchise opportunities are attractive to former corporate executives. It’s because they’re used to running medium to large businesses, and they’ve become accustomed to bringing in a nice income.
There’s another reason why executive-types like the idea of owning a multi-unit franchise business. It’s because they can witness the growth of their franchise business first-hand.
How Multi-Unit Franchising Works
In general, multi-unit franchise contracts specify that franchisees are obligated to open a specific number of units in a certain period of time, in a pre-determined geographical area. To reserve that area, and the future franchise units you’re obligated to open, you’ll pay a either a portion of the upfront franchise fee for each future unit you’ve agreed to open, or the (normally discounted) entire amount. It depends on the franchisor-and the multi-unit franchise contract that’s been written.
For example, if the initial franchise fee for a single unit franchise is $30,000, and you sign a three-store franchise contract, the fees for the 2nd and 3rd store may be discounted if you pay them in full, to let’s say $20,000 each. So, when you sign your three-store agreement, you’ll write a check for only $60,000 instead of the full-price of $90,000.
One more thing; when you reserve a specific geographic area in which you agree to open a certain number of franchises, you must open them. If you don’t, you’re considered to be in breach of your contract.
Would You Like to Be A Multi-Unit Owner?
If you qualify, financially, for multi-unit franchise ownership, should you go ahead and pursue this type of business operation?
I say yes, if you want to own a business you can grow, and you like the idea of controlling an area.
But you need to be prepared to have employees, including managers, to help you run your businesses. Plus, you’ll need to have a fair amount of working capital on hand for things like inventory, advertising, and payroll.
To summarize, multi-unit franchise ownership can be a wonderful way to grow a business. It’s up to you to decide if that’s the way you want to go as the owner of a franchise.
The Franchise King®, Joel Libava, is a top franchise expert. He’s written over 2,000 different articles on franchise ownership and personally consults with people who are looking to buy a profitable franchise. Go here to find out how The Franchise King® can help you become your own boss.