Does It Make Sense to Become a Multi-Unit Franchisee?
Is owning multiple units of a franchise brand better than owning only a single unit? Many business owners considering multi-unit franchising are existing franchisees who have an existing, successful unit. Their business is expanding rapidly and they have an excellent relationship with the franchisor. While planning for their business’s future, they want to know whether multi-unit franchising is worth the risk.
Owning a multi-unit franchise is interesting, challenging, and potentially lucrative. Yet, there are certain challenges multi-unit business owners face. The following are the advantages of owning a multi-unit franchise:
Multi-unit franchises are more stable than single units and generate higher profits. Business owners can expect higher revenues because multiple locations will contribute to the revenues. Their risk is also spread out; revenues are not dependent upon only one location.
You’ve Already Succeeded Once, Your Chances of Success are Higher the Second Time
You Can Take Over Failing Units
If your business is going well, you can acquire failing locations inside of your system at a low cost. You can then use your experience to make them profitable.
Scale Equals Greater Profits
Multi-unit franchisees spend more on advertising, marketing, training, and staffing. This allows you to negotiate bulk discounts from your suppliers and earn a greater profit. You already have experienced, trained staff whom you are paying. When you purchase additional units your marginal cost will be lower, allowing you an excellent return on investment (ROI) for multiple locations.
Improved Franchisor Relations
Multi-unit franchisees are more important to franchisors than single-unit franchisees because they generate higher profits. Franchisors value business relationships with multi-unit owners more. They often give them better terms and support.
The following are the disadvantages of owning a multi-unit franchise:
When you invest more money, you are putting more capital at risk. There is always a chance that you may lose your money. You may also face cash flow challenges.
Lack of Focus
Multi-unit franchisees sometimes find it harder to focus on particular units. This makes it harder to deal with issues as they come up which could result in lower profits.
Finding and managing the right employees becomes more challenging while managing multiple locations.