By Reeves Simmons.
Updated Feb 14, 2020
Multi-unit franchise operators are on the rise. Some buy multiple units in the same brand. A few buy more than one franchise in different but competing brands. Others buy multiple units in totally different sectors.
For the franchisor, it is highly advantageous to have a successful site operator running more than one unit. Once a franchisee has proven themselves in one territory, chances of success in multiple territories are higher.
Franchisors are taking less risk with somebody that has already proven their ability to manage the business model. No matter how careful the initial evaluation process is, it is not always possible to tell which franchisee has the mettle to run a business successfully when they buy their first unit.
Less training time is required when a franchisee buys their second unit. The franchisee has already done the initial training course and also possesses real-live knowledge of operating the business in the field.
For the franchisee, the advantage of owning more than one unit is that they have already operated the first unit profitably. They know the upsides and downsides of the business model. They already have established close relations with the franchisor. They understand in more detail the demographics of the areas the business model is likely to work in.
Operating multiple units can also be more cost-effective. All the paperwork, accounting records and manuals can be done at one central location. Incoming calls can be diverted to one location, screened and then dispersed.
Advertising and printing costs can be spread out over a number of sites. It also becomes possible to use higher-cost advertising, like radio and TV, when you can spread the cost over a number of units.
Employees can be utilized more effectively and can be shared across the group. If one store has several employees out sick all at once, for example, they could draw upon the human resources of the other units.
A multi-site operator also benefits from have greater buying power. It is possible to make significant savings by buying in bulk, making each individual unit more profitable.
But multi-unit franchising is not right for everybody. Workloads and pressure rise as more units are opened. The ability to deal with a larger number of people is of the utmost importance. The ability to handle and manage larger amounts of data becomes critical. It is no longer possible to use paper-based systems!
The worst type of multiple site owner is one that is under-capitalized and trying to grow on a shoestring budget. This can be disastrous for both the franchisee and the franchisor when and if the money runs out.
So what are the characteristics of a successful multiple site owner? Usually, the type of person who operates multiple units is older, has more business experience and larger sums of disposable funds.
For experienced entrepreneurs who do possess people skills, can manage large amounts of data and have deep pockets, it makes sense to buy more than one unit. They can expand their business and multiply their profits.