In the fast-growing world of franchising, owning multiple franchise businesses has emerged as a popular and lucrative strategy for both franchisees and franchisors. This approach allows entrepreneurs to expand their reach, scale their operations, and increase profitability. With the right vision, skills, and financial resources, multi-unit ownership can be a gift that keeps on giving.
The Rise of Multi-Unit Franchising
The franchising industry has witnessed a significant shift from single-unit ownership to multi-unit ownership. According to industry reports, over 50% of all franchisees now own multiple units. This trend is driven by the numerous benefits that come with owning and operating multiple franchise businesses.
Vision, Skills, and Financial Wherewithal
Multi-unit franchisees are individuals with a clear vision, strong business acumen, and the financial resources to manage and scale multiple businesses. They are empire builders who possess confidence in themselves and the franchise concept they join. These franchisees are intentional and deliberate about their growth, and franchisors often help them create a development plan to sequentially launch their units.
Economies of Scale
One of the key advantages of owning multiple franchise businesses is the ability to leverage economies of scale. By operating multiple units, franchisees can reduce costs and increase efficiency. Franchisors often provide financial incentives to franchisees who purchase multiple units, such as reduced upfront franchise fees or lower royalties at certain revenue breakpoints. Additionally, fixed costs can be spread across several locations, resulting in cost savings. For example, shared staffing resources and centralized operations can lead to reduced overhead expenses.
Diversified Risk and Multiple Revenue Streams
Owning multiple franchise businesses also helps mitigate risk by diversifying investments across different locations or territories. This diversification allows franchisees to withstand economic fluctuations and market challenges more effectively. Moreover, multiple units provide franchisees with multiple revenue streams, further enhancing their financial stability and resilience.
Benefits for Franchisees
Multi-unit ownership offers numerous advantages for franchisees, enabling them to achieve accelerated growth, greater income potential, and management flexibility.
Multi-unit ownership allows franchisees to expand their reach within their communities and scale their operations more rapidly. By opening multiple units, franchisees can penetrate the market more deeply and increase their revenue. With each additional unit, franchisees have the opportunity to generate additional income, resulting in faster business growth.
Greater Income Potential
One of the primary benefits of owning multiple franchise businesses is the potential for greater income. By operating multiple units, franchisees can generate more revenue compared to single-unit owners. Assuming all units are equally successful, franchisees can expect to earn significantly more than they would with just one unit. This increased income not only provides financial stability but also offers franchisees more options and flexibility in running their businesses.
Many franchisees aspire to transition into semi-absentee ownership or achieve a better work-life balance over time. Owning multiple franchise businesses can help facilitate this transition. With higher revenue and income from multi-units, franchisees have the financial ability to reduce their time commitment and delegate responsibilities to their trusted management team. This flexibility allows franchisees to focus on strategic decision-making and long-term growth.
Multi-unit ownership can lead to cost reduction for franchisees. By spreading fixed costs across multiple locations, franchisees can achieve economies of scale and enjoy cost savings. For instance, shared resources like staffing, equipment, and advertising expenses can be allocated more efficiently across multiple units. These cost efficiencies contribute to higher profitability and a stronger bottom line for franchisees.
The experience gained from operating the first unit can be leveraged to launch and run subsequent units more effectively. Franchisees can apply their operational expertise and learnings to streamline processes, improve performance, and achieve better results with each new unit. Additionally, franchisees can rely on experienced staff from their existing units to support the opening and operations of additional units. This shared expertise enhances operational efficiency and drives faster business growth.
Benefits for Franchisors
From the franchisor’s perspective, multi-unit ownership offers several benefits, including accelerated brand growth, stronger franchisees, and increased sales revenues.
Accelerated Brand Growth
Franchisors can achieve accelerated brand growth by partnering with multi-unit franchisees. By expanding their reach through multiple units, franchisors can establish a stronger presence in the market and increase brand awareness. Multi-unit franchisees, with their commitment to growth and expansion, play a crucial role in driving the success and visibility of the franchise brand.
Multi-unit franchisees are often highly committed and motivated individuals who possess the skills and resources to manage and grow multiple businesses successfully. These franchisees bring valuable experience, knowledge, and operational expertise to the table. By working closely with multi-unit franchisees, franchisors can benefit from their insights, feedback, and contributions, leading to a stronger and more resilient franchise network.
Increased Sales Revenues
With multi-unit ownership, franchisors can expect higher sales revenues. By opening multiple units, franchisees can tap into different markets, attract a larger customer base, and drive more sales. This increased revenue not only benefits franchisees but also contributes to the overall growth and profitability of the franchise system.
Ongoing Franchisee Support
Franchisors play a crucial role in supporting their multi-unit franchisees. They provide guidance and assistance in various aspects of business planning, site selection, store setup, training, advertising, and marketing. Ongoing support, training programs, and regular communication help foster a strong partnership between franchisors and multi-unit franchisees, ensuring their continued success.
Owning multiple franchise businesses can unlock a world of opportunities for both franchisees and franchisors. With the potential for accelerated growth, greater income, cost reduction, and shared expertise, multi-unit ownership has become a popular strategy in the franchising industry. By leveraging economies of scale, diversifying risk, and capitalizing on multiple revenue streams, franchisees can build thriving businesses, while franchisors can achieve accelerated brand growth and establish a stronger franchise network. With the right vision, skills, and support, multi-unit ownership can be a rewarding and profitable endeavor for all parties involved.
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About Aaron Bakken
Franchise Consultant for The Franchise Consulting Company
Aaron has 20+ years of franchise and independent business ownership experience. He also spent 5 years as the VP of Franchise Development for an international franchise group, growing the franchise to the advent of a private equity buyout. Whether you are looking to buy a franchise opportunity or franchise your business, Aaron knows how to guide you.