Single vs multi-unit franchising: Josh Robinson finds out why more locations are worth the effort
As a franchisee, if you’re signing a franchise agreement, one of the questions you are bound to ask is: “Should I stick with a single unit or sign a deal that provides an opportunity to open multiple locations?”
The answer to this question has increasingly shifted towards opening multiple units. Franchise market research firm, FranData, reports that during the past 20 years multi-unit franchising has become one of the key vehicles for developing a sustainable business.
In fact, FranData counts more than 40,000 multi-unit franchisees in the United States operating more than 200,000 locations.
For those who are just getting into the business model or building upon their single unit, the upside of multi-unit franchising leads several to head in this direction. The scalability of franchising offers unique opportunities to create income, wealth, lifestyle and equity that otherwise could be much more difficult.
Yet, scaling a franchise business can be a challenge without proper funding, operations experience and company infrastructure.
Without a doubt landmines exist, but strategic planning and execution can provide the pathway to multi-unit franchise ownership, which offers a vast collection of benefits.
As you consider creating a franchise enterprise with multiple units, and even multiple brands, here are the three most significant advantages:
Consider this: Franchise Update Media Group reported that nearly 700 of the nation’s most prolific multi-unit franchise investors represented an aggregate annual revenue exceeding $10 billion. Collectively the group will open 2,000 more units in the next two years and with plans to open 11,000 in the next five years.
The insatiable appetite of highly successful multi-unit franchisees comes from a clear recognition that there is strength in numbers.
It’s no secret that opening a franchise comes with a cost – from the initial franchise fee, attorney fees, build-out expenses and other miscellaneous expenses, your investment spans across a broad range.
When entrepreneurs choose to sign a single franchise agreement versus a multi-unit agreement, they may not realize they are signing on to pay many of those fees multiple times if they decide at a later time to invest in another unit.
Beyond the efficiencies that can be recognized when you first become a multi-unit franchisee, cost savings can be realized throughout the life cycle of the enterprise being built, including: purchasing power, the efficiencies of having one back of the house for multiple locations, reduced fees and royalty breaks.
Replicate what works best
When franchisees amass a collection of units, best practices emerge. Due to factors such as personnel, operations and real estate selection, certain locations begin to reach profitability levels that distinguish them from the others within the portfolio.
The fact of the matter is that multi-unit franchisees can access and analyze data that allows them to identify trends.
For example, when a franchisee can pinpoint that a manager has a store performing at peak levels, tapping into that knowledge and designing specific training for all locations can be created to raise the performance of all locations.
In the end, efficiencies are established that foster opportunities for franchisees to work on growing their business rather than working in their business every day.
As a result, financial stability is achieved, thus ongoing development is made possible along with remodels and equipment updates to remain current with customer demand and preferences.
Developing an infrastructure
Single-unit franchise owners often find themselves wearing every hat within the business. Oftentimes this means the business becomes more of a job than an enterprise that creates value in the near and long terms.
In this scenario, franchisees are stuck in the whirlwind of ownership and in-store, day-to-day operations versus working on improving the business and growing it.
In contradiction, multi-unit franchising provides a pathway to building an enterprise with a support system made up of well-trained managers and team members that can foster growth. In many cases, resources can be shared and promotions become viable within the family of units.
From operations to finance and marketing to human resources, multi-unit franchisees will be in position to develop and pull from a talent pool within their business.
Multi-Unit franchising: Advantages for Franchisors
1. Systemwide consistency
Franchising is built upon replicating a proven model. In turn, it is to the benefit of franchisors that they attract and maintain strong multi-unit franchisees. Multi-unit franchising facilitates operational consistency by offering franchisors a smoother training process and ensuring there is a well-structured business plan put in place across a particular region. By working with an owner who is a multi-unit franchisee, your franchise can better maintain high-quality customer experiences at the local level, which can have a positive effect on the brand’s reputation as a whole.
At Pearle Vision, our area development franchising program is designed to be an enticing “win-win”. In exchange for a per-unit development fee, area developers receive exclusive rights to their territory and a reduced royalty fee, which provides the potential for a strong return on their investment. We are able to offer flexible development plans starting with a minimum of three units. Enticing incentives help franchisors better attract developers who can grow a single region and enhance operational consistency.
2. Reach growth goals
Once you’ve secured a dependable multi-unit franchisee to expand in a particular region, your team will spend less time vetting through additional prospective franchise partners for that area. Instead, franchisor teams can focus on developing additional new territories and dedicate resources to other needs within the company.
In turn, the franchisor will likely have less time between location openings in the multi-unit franchisees’ regions and you’ll be able be to establish a routine and solid relationship with the franchisee.
Plus, when only one franchisee is involved in development of the market, the owner will often choose to work with the same set of local vendors throughout the build-out process, from site selection through construction and eventually opening day.
As your multi-unit franchisee reaches the fourth or fifth location, the procedure becomes simpler for everyone involved. Ideally, if a lesser number of third parties are added into the mix, the projected growth plan stays on course.
ABOUT THE AUTHOR
Josh Robinson, Vice President of Licensing & Development, is responsible for defining and developing business strategies to grow the Pearle Vision franchise system. In addition to franchise development experience, Robinson spent more than 20 years supporting franchisees and helping them optimize the performance of their businesses. Before joining Pearle Vision, he was Senior Director of Operations for Dunkin’ Brands.