If you are reading this article, chances are you don’t need to be convinced of the benefits of franchising. While many of the benefits of owning a singular franchise can translate over to owning multiple, there are some additional advantages that multi-unit franchise operators have access to that single-unit franchisees do not.
Whether you are already a franchise owner looking to expand or you want to jump into the world of franchise ownership with multiple units right from the start, we are going to cover what some of those advantages are and why multi-unit franchising may be right for you. But first, let’s look at what multi-unit franchising is and its popularity in the US.
Aptly named, multi-unit franchising means that the franchisee has invested in more than one franchise unit, usually within an authorized geographic area or (in franchising terminology) a territory. What significantly differentiates a single-unit franchisee from a multi-unit franchisee, other than the number of locations, is their involvement. Franchisees with one location will have a more hands-on approach in their location and could be required to invest more time into running it, especially in the beginning.
A multi-unit franchisee, on the other hand, cannot physically be as involved in every location to as great of a degree, as there are simply not enough hours in a day and it’s impossible to be in multiple places at once. However, that doesn’t mean the responsibility is removed when you invest in more than one franchise unit, but it does mean franchise owners may rely more on management teams to run each location. Therefore, multi-unit franchising can appeal more to those interested in semi-absentee ownership.
A multi-unit franchisee will receive an Area Developer Agreement (also known as a Multi-Unit Development Agreement), which outlines the number of units a franchisee must open within a particular territory in a set timeframe. With this Agreement, the franchisee is guaranteed that specific territory, which means no other franchise owners can open a location in that area. In other words, an Area Developer Agreement lists how many franchise locations a franchisee will open over time and in what area, and if this is not adhered to, the franchisee could face a restriction from opening any additional locations.
Current stats by FRANdata indicate that multi-unit franchisees in the US control 54% of all franchised units. That means there are more than 43,212 multi-unit franchisees that control more than 223,213 franchised units. The US has seen major growth in multi-unit franchising; from 2010-2018, there was approximately 23% growth in franchisees owning two to five units. Meanwhile, multi-unit franchisees who invested in six to ten units also saw significant growth in the same period at almost 34%, with the percentage increasing the greater the number of units.
It is clear that multi-unit franchising has become increasingly popular, and here are some reasons why.
GREATER CHANCE OF SUCCESS AND REVENUE
Let’s say a franchisee enters into a franchise agreement for a business that offers multiple revenue channels. While there are many advantages to doing so, one of the greatest is the franchisee has the opportunity to generate profit in different areas – if one stream is not performing well for a certain period, at least there are several more that can. Using this example in the context of multi-unit franchising, the franchisee can run multiple franchise locations that have multiple streams of revenue, meaning they are only building upon their success the more they grow.
For instance, if one location relies more on one service offered, but another location relies more on the others, which could be merely caused by geographical area, franchisees have the opportunity to come “full circle” and generate steady revenue within all of the services they offer throughout the multiple locations. This diversification across geographic areas can be appealing to franchisees, especially those who currently own a single unit.
The greater potential for income can lead to more stability. In situations of global economic instability, such as a looming recession, the more franchises you have, the greater chance you have of maintaining a steady cash flow, especially if you are hitting copy and paste on each location you open (aka you are repeating the successful techniques you have developed in previous units.)
With multi-unit franchising, you are exposed to a greater audience, which can lead to a larger customer pool and greater sales. For those interested in growing from a single-unit franchise, investing in multiple units only expands your expertise. Since this isn’t your first go at it, subsequent locations after your first become that much easier to move forward with.
For those who want to invest in multiple from the jump, the more familiar you are with the inner workings of running a franchise, the number of locations you have won’t necessarily complicate things more. You are simply taking what you know and applying it across locations rather than just one since each location runs on the same proven business plan.
MORE OPPORTUNITIES TO SAVE
You might be wondering how you can save if there is a greater investment required to obtain multiple units. And while many franchisors offer a discounted percentage on the initial investment when a franchisee purchases multiple units, it remains true that this is no small investment. However, the savings can begin rolling in once the locations are up and running.
For example, multi-unit franchisees have a greater chance of negotiating lower costs from their vendors and suppliers, mainly because they can purchase inventory or equipment in bulk. Additionally, multi-unit franchisees can benefit from economies of scale, which leads to reduced overhead expenses for each franchise location. Marketing expenses can also drop, especially if other units are within the same geographical area, as marketing for one business can automatically help another inadvertently because it can spread among all units.
Multi-unit franchisees can also save money on staffing and training, particularly for those with units that are within the same geographic area. Multi-unit operators are able to open faster if they can pre-train and pre-purchase needed materials. Rather than hiring a new team for each location, some franchisors will transfer staff from each location or have them alternate locations. While there will still be a need to hire new employees, franchisees can find lesser costs involved with this. Plus, many multi-unit operators see greater employee retention as there is more career growth opportunities within a multi-unit network than for just one location.
With these savings (and many more) across multiple units, franchisees can get a higher return on investment (ROI) thanks to the greater likelihood of success franchisees have from the multiple locations.
GREATER WORK-LIFE BALANCE
As we mentioned previously, it would be impossible for a franchisee to give all of their attention across multiple locations, especially as the number of those units increase. This is why those interested in pursuing franchising under a semi-absentee or fully absentee ownership model may consider investing in multiple units upfront. On the other hand, franchisees who currently have one location and have put in the work to generate success may now be looking for a less direct approach to being a franchisor. In both cases, a greater work-life balance can be achieved.
MULTI-UNIT FRANCHISING WITH DOGTOPIA
Dogtopia has a number of successful multi-unit franchisees, and we support our entire franchise family every step of the way. In fact, Dogtopia has a dedicated team to support all multi-unit franchisees and their success as we understand multi-unit operators face unique opportunities and challenges. To learn more about franchising with Dogtopia, our FAQ page is a great first step to find out more. If you meet our initial requirements, you can also fill out our online inquiry form to find out more.