If you can see yourself becoming the owner of more than one franchise business, you’re not alone. Almost 75% of the people who contact me for franchise information do too. Especially those at the executive-level. I’ll show you why.
The Appeal Of Multi-Unit Franchise Opportunities
There’s a reason why multi-unit franchise opportunities are attractive; their potential return.
Think about it. Would you rather own:
A. One franchise business that brings in $650,000 in annual revenue
B. 3 franchise businesses that bring in $650,000 annually
I’m going to go out on a limb and say that you chose “B.”
Important: In a perfect world, by the time your 2nd and 3rd franchise locations open, you’ll have your monthly expenses buttoned up tight. (Because you learned a lot about inventory, ordering etc. after your 1st location was up and running for a while.)
As a result, your new locations may bring in more profits, because lower expenses = higher profits. (Based on the same revenue numbers.)
And even if the scenario above doesn’t play out exactly like I illustrated, you still own 3 business. That’s 3 different places where profits (hopefully) are coming in every month. How great is that???
Multi-Unit Franchise Agreements
Generally, a multi-unit franchisee (at times also called a sub-franchisor or a master franchisee) is obligated to open a certain number of franchises in a certain period of time, in a specific, pre-determined geographical area. In order to reserve that geographical area, and the franchises the franchisee is obligated to open, the franchise fee for each future unit you’ve agreed to open is paid in advance. But wait...
Sometimes the upfront franchise fees are discounted because you’re purchasing multiple franchise units upfront.
For example, the initial franchise fee for a single unit franchise may be $45,000. But since you’re agreeing to open 3 franchises (instead of only one), the franchisor may charge you a franchise fee of $30,000-for each franchise instead of $45,000 for each one. So, when you sign your multi-unit agreement (in this case, 3 units) you’ll write a check for $90,000 instead of $135,000. Such a deal.
Discount or not, the bottom line is when you sign a multi-unit franchise agreement, you’re committing to opening a certain number of franchises-and you must open them. That’s because you’re legally bound to do so.
And speaking of legalities, as I mentioned, your multi-unit franchise agreement will include a timetable stating when each franchise needs to open.
For example, you may be required to open your 1st unit within 6 months, then open your 2nd unit 18 months after your 1st franchise opens, and open your third unit 18 months after your 2nd unit opens.
Tip: Before you sign a multi-unit franchise agreement, hire a franchise attorney who has experience with multi-unit franchise contracts. They can be a bit complicated.
Multi-Unit Franchise Research
When you do your research, it’s crucial to talk to real-life multi-unit franchisees. You don’t even have to find multi-unit owners who own the franchise opportunity you’re investigating. Just find a couple you can talk with. Tell them your situation. Ask them why they decided to go the multi-unit route and if they’re glad they did. Ask them questions about financing. See if they have any specific tips for finding great locations. Ask them what they wish they would have known before they bought their franchise business. I think you’ll be pleasantly surprised how many of them will talk with you.
One more thing; you’re going to have to have an above average net worth to qualify for a multi-unit franchise opportunity. That’s because you’re potentially investing $500,000 or more in total.
At a minimum, your net worth should be $600,000, with available liquid capital of around $175,000.
In summary, multi-unit franchise ownership can be a profitable, exciting venture.
Just choose a good franchise concept-one that seems right for your geographical area, and make sure you have the capital needed to grow your business. Your multi-unit franchise business.
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.