People dream of entering the world of entrepreneurship. They love the idea of being the…
When prospective franchisees picture being part of a thriving franchise, they usually imagine pulling into a multi-unit franchise location and watching the business teem with energy, enthusiasm and entrepreneurial verve.
The independent research firm FRANdata has actually shown that the majority of franchisees (52 percent) are now multi-unit operators. Franchise Update Media Group went onto say that multi-unit franchises are the majority because they provide more stability throughout market downturns or periods of national fiscal volatility.
Fast food, beauty and restaurant franchises lead the charge when it comes to multi-unit operations, and that’s no surprise, considering service industries can make it work virtually anywhere. The same franchising maxim holds true here as elsewhere, though: location is your underlying ticket to success.
Why the Trend toward a Multi-unit Franchise is Here to Stay
Many franchisors have shifted away from the owner-operator model and prefer to deal predominately, or even exclusively, with overseeing multi-unit franchisees.
Franchisors note the higher profits and industry trend toward multi-unit ownership, and have tailored their multi-unit franchise contracts accordingly.
That is, thousands of franchisors now work into their franchise contracts “development schedules,” in which the franchisor is expected to open a new location on a fixed schedule.
Expandability, Economies of Scale and Brand Diversification
That, as franchisees have increasingly come to realize, is hardly a bad thing. More than three-fourths of the food franchising industry (~77 percent) is comprised of multi-unit ownership because this allows franchisees the chance to quickly expand outward and meet existing market demand.
Aside from the expandability factor, multi-unit franchisees have the advantage of being seen as more reliable by franchisors — and usually more profitable as well — and they tend to enjoy more robust relationships with real estate developers, loan companies and vendors.
In short, the ability to quickly expand outward and capture the market, coupled with the economies of scale offered by multi-unit ownership, have turned multi-unit ownership from a trend to a staple of the franchising industry.
Why Location Matters More than Ever
Right off the bat we need to differentiate between two kinds of multi-unit franchising, as this difference will dictate whether you rule the roost when it comes to picking the location or whether you, the franchisee, are contractually obligated to expand according to a set timeline and within a certain area.
One kind of multi-unit expansion is what’s known as “area development,” a schedule during which the franchisee is actually contractually obligated to open a set number of stores on a fixed timeline in keeping with the franchise contract (e.g., a store annually in “x” location once per year for three years). Discounted franchise fees are one advantage to this setup.
Corner the Market, Efficiently Train Staff and Protect Your Investment
The other kind of multi-unit expansion is what’s known as sequential multi-unit franchising, in which franchisees have a bit more latitude. In the franchisor’s eyes, the franchisee has earned this extra latitude to open additional units under different contracts by virtue of the franchisee’s financing, experience and recent success.
Because sequential multi-unit franchising is a different breed altogether — in which you’re not limited to one geographical area and where you can more autonomously pull the strings on location, hiring and branding decisions — you have the option of cornering the market in one area or even offering complementary services to keep customers coming back.
Opening more than one location in a thriving area also affords you the chance to efficiently shift staff members from one location to another, streamline your training to maximize resources, recover any losses experienced by a nearby location and create a more powerful brand experience for regional customers.
Find out how you can open a multi-unit franchise of your own with Signarama today by visiting our website.