The lifecycle of a franchisee: Stage Two - becoming a multi-unit franchisee

There are a few key factors to consider before becoming a multi-unit franchisee:

• Market Demand: Is the customer base large enough to sustain a second or third location. Whilst franchisees can leverage economies of scale, the ability to expand will be dependent on brand recognition. Brands with a loyal customer base will be able to sustain more outlets per location or territory.
• Leadership: Being a multi-unit franchisee involves overseeing a larger team of employees and managers across multiple locations. Delegation and leadership skills become essential. Expanding franchisees will need a strong management team, so that they can focus on strategic decision-making, business development, and scaling their franchise empire.
• Cash management: Owning multiple franchise units can provide a higher level of financial stability, however, they also require a higher degree of capex and operating cash. Expansion can place a strain on financial resources and jeopardise the financial stability of the original territory.

Further considerations

However, the decision to expand into multi-unit ownership does not solely lie with the franchisee. Many brands limit the number of multi-unit franchisees within their network. There are several reasons for this:

• Franchisees may not have the capacity or skills to move from owner operator (hands on) to being a management franchisee leading and directing others.
• Being a successful multiple-unit franchisee calls for a semi-passive approach that relies on technology and greater management sophistication.
• Franchisors prefer franchisees to maximise the value from their existing territory, without risk of dilution or distraction. Many brands prefer to operate a larger franchise network with partners who are dedicated to delivering the best value from their territory.

Benefits of a multi-unit approach

In the right circumstances with a supportive franchisor, there are many advantages to a multi-unit growth strategy. It allows entrepreneurs to leverage the knowledge gained from operating one unit and apply it to subsequent units, where they can refine their systems and processes and allocate resources more efficiently. These efficiencies are built on familiarity of system and replication, which reduces time on brand immersion and training.

Multi-unit operators within a system provides a franchisor with options, as it can help facilitate the exit of existing franchisees, drive faster growth and reduced networks equal reduced costs. In addition to generating more income, many multi-unit owners appreciate the revenue diversification that comes with managing more than one franchise location. Owning multiple franchises can sometimes mean a safer investment since they do not depend on a single site to make all the revenue.

There are many good reasons to invest in a multi-unit franchise. Whether your goal is to prepare for retirement, build an additional income stream, or go full time, the opportunity for generating wealth as a franchise owner is tremendous. If you feel owning multiple franchises is attractive, do your due diligence. Take the time to research, talk to other franchise owners, and even talk to a qualified franchise consultant service.

Being a multiple-unit franchisee may not be for everyone, but it might just be your road to financial prosperity and security. With its popularity growing, now may be the perfect time to invest.