Patience is a virtue, but when it comes to franchising, it can also be a mistake.
That’s the message I have for some franchise candidates when they are missing the opportunity to launch their own franchise empire but are being too cautious by considering only one unit. While in many circumstances beginning a franchising journey with one franchise absolutely is the smartest bet, many franchise systems are better suited for people to take the plunge as a multi-unit franchisee or area developer.
First, let’s review what I mean by those titles. A multi-unit franchise owner is exactly what it sounds like: a franchise owner that owns multiple units. This is most common in franchises that offer a semi-absentee model, meaning owners can continue to launch additional units without much time being required to operate them. This is common with retail stores that feature an in-store manager handling the day-to-day operation while the owner handles CEO type work.
An area developer may or may not own his own franchise unit but will purchase the rights to develop an entire area. An area developer reaps the benefits of franchise fees and royalties when selling units to others inside their territory. This is sort of like being a mini-franchisor, helping franchisees in your area launch and succeed, though the majority of the support is still handled by the franchise system.
Both of these involve a greater commitment from a franchise candidate than just opening one franchise unit, but in many instances, it’s the right thing to do.
You’ll likely get a discount. Like many things purchased in bulk, franchise systems generally offer a substantial discount on their franchising fee when a candidate purchases multiple units. This can save a franchise candidate thousands of dollars per unit that can be used for other purposes when growing the business.
You don’t have to open all the units at once. Franchisors have no interest in overwhelming new franchise candidates by insisting they try and launch three franchise units all at the same time. Instead, franchisors work with the franchise candidate on an appropriate timeline for opening each unit, often allowing for 1–2 years in-between openings. This gives the franchise candidate time to learn the business, hire and train staff and establish stability with each unit before launching the next one.
Scalability is a beautiful thing! Franchise systems featuring a semi-absentee operating model allow owners to open multiple units without drastically increasing the hours they must spend to run them. Each unit has its own manager and staff, meaning the owner can just dedicate 10–15 hours per week handling CEO-type, back-of-the-house work. Plus, they can take advantage of price breaks on costs of goods while consolidating marketing efforts. So, with each additional unit opened within your territory, costs are lower, time commitment rises slightly while profit margins theoretically remain the same. That’s a major benefit!
Less sensitivity to business swings. Multi-unit franchise owners are better insured against localized downturns in business because they have multiple units to rely on. If one unit hits a temporary struggle due to a loss of management or a competitor opening nearby, the franchise owner still has other units to keep his investment going while the struggling unit weathers the storm. Single-unit owners are more susceptible to the normal ups and downs of a business cycle because they only have one business.
Franchisors favor candidates who think big. More than ever, there are franchise systems who are only working with people interested in multiple units and/or area development. That’s for several reasons: training efficiency, growth mindset and the ability to handle downturns. Therefore, candidates who enter the franchising process open to the idea of considering multiple units and/or area development will have a deeper pool of franchise systems to consider.
Want to know more about multi-unit franchising or area development? Give me a call at 919.846.7111 or send me an email at email@example.com.