Benefits and Challenges of Multi-Unit Franchising
Multi-unit franchising has increased in popularity over the past few decades. Under this particular franchising model, the franchisor typically depends on franchise location managers run each individual location. The franchisor is a person or couple that manages the entire operation, and these multi-unit franchisors often develop into large corporations with many different franchise brands in their portfolios.
More information about multi-unit franchising can be obtained from a Franchise Guardian advisor, but this article explores some basic benefits and challenges.
What is a Multi-Unit Franchise?
Multi-Unit franchising is when a single franchisor purchases the rights to develop and own multiple franchise units in an exclusive territory. As mentioned above, some multi-unit franchisors obtain the rights to operate franchise units from different parent companies. This is a great way to diversify over several different industries to balance risk and profit.
For the entrepreneur who pursues multi-unit franchising, there is usually an Area Developer Agreement that spells out the number of units that the multi-unit franchisee can open, including the time period and territory of planned expansion. Then of course, there is an individual Franchise Agreement between the parent company and franchisee for each unit to be opened.
What are the Benefits of Multi-Unit Franchising?
The primary benefit of multi-unit franchising is that the more businesses you own, the more potential there is for more customers, higher sales, and generating a higher profit. According to the International Franchise Association Education Foundation, while less than 20% of all franchise units are involved in multi-unit franchising, they account for 52.6% of all units. Further, multi-unit franchises average between 4.3 units (in single-brand systems) and 5.83 units (in multi-brand systems).
Also, due to your increased sales volume, the multi-unit franchisor can likely negotiate better prices on supplies and equipment, even with the parent company. More volume means you can purchase in bulk from fewer suppliers, at preferred pricing, and use items in all your franchise units.
Marketing a multi-unit franchising operation is simpler. You can run television, radio, print, and internet marketing campaigns that point consumers to all your locations. The cost is the same for franchisees who own but one location; for the same cost, you can highlight all your units in the area.
Your employees also benefit from your multi-unit franchising operation. There are more career opportunities in a large organization, with chances to grow and accept more responsibility. You will likely also quality for lower insurance rates for your employees, which can be part of an overall benefits package. Good benefits attract and keep the right kind of employees.
What are the Challenges of Multi-Unit Franchising?
Of course, the larger your multi-unit franchising operation, the more challenges you will face. Some of the top challenge mentioned by multi-unit franchisors are briefly outlined below.
Growing More Than One Franchise with Different Business Models
Multi-unit franchising is difficult enough when all your franchises are of the same brand. But consider keeping up and working to grow several franchises from different brands. Each will have its own business model and set of procedures. Even with a location manager to oversee each franchise, the multi-unit franchisor must be knowledgeable about each franchise and what it takes to grow the organization.
Acquiring and keeping the right people is critical to any business or organization. People are the fuel to the engine. Having great people around you to push the envelope and bring different perspectives is an invaluable resource. Multi-unit franchising, especially with different brands, means you need a variety of people with different skills. And some areas may have a dearth of people with certain skills, like hairdressers, qualified service techs, and more. And more franchise units add to this challenge.
Maintaining Life / Work Balance
Multi-unit franchising means many different irons in the fire, and the franchisor must stay up-to-date on everything. Even an overall business manager style of franchisor with multiple location managers will struggle to maintain a healthy balance of work and personal life. Many multi-unit franchisors chose franchising as a route to more financial and personal freedom, only to find themselves consumed with work and struggling to enjoy any time off.
Keeping Up with the Changing Environment
While many may view franchising as an unchanging business model (follow the set business plan and move on), the only real constant is change. Franchising as a concept has evolved, as well as how different industries are involved in franchising. Consumer habits and priorities change, employee wants and needs change, and the economy is always in flux. Multi-unit franchisors must labor diligently to keep up with how all these and other changes affect their different franchise brand locations.
Multi-unit franchising is definitely popular and many enjoy great success pursuing it. Franchise Guardian can provide assistance to franchisors who invest in multiple franchise units. We not only help you franchise your business, or locate a suitable franchise opportunity, but we also provide ongoing assistance as your organization grows. Contact us for more information about how we can help you with multi-unit franchising.