As you’re investigating franchise ownership, you’ll need to make a number of important decisions. Some of these will involve questions about you personally: for instance, what kind of owner do you want to be, and what type of franchise suits your leadership style? Both these questions connect with a third one: do you prefer multi-unit franchise ownership, or do you want to be a single-unit owner?
In my previous posts on ownership types and leadership styles, I touched on this question briefly. Two weeks ago, I started to dig a little deeper by exploring the pros and cons of single-unit ownership. Now it’s time to do the same with multi-unit franchise ownership. If you’re still unsure what’s right for you, hopefully these posts together will help you make an informed decision.
The Pros of Multi-Unit Franchise Ownership
More Opportunity
When you’re a single-unit owner, your business never grows beyond your personal capacity. But when you own multiple franchises, your business can grow exponentially. Multi-unit franchise ownership does come with increased overhead, but if you manage your business well and focus on smart growth, your income should far outpace any added expenses. Owning multiple units is the most popular and most reliable way to build wealth through franchising.
More Clout
Owning multiple franchises adds to your influence and position within your franchise network. Many franchisors establish tiers based on revenue or number of locations owned, with multi-unit owners eligible for a number of incentives. Among other concessions, these might include:
- Reduced up-front fees when you commit to multiple units at once
- Easier scalability by building on your own best practices
- Area-developer rights that provide you with a large, protected territory
- Economies of scale and dedicated corporate marketing support
- Ability to host exclusive events that drive market demand
Built-in Backups
As I mentioned last week, anything from a burst pipe to a tornado to a pandemic can add to your costs or even shut down your business. Multi-unit franchise ownership diversifies your portfolio, so to speak, so that you can maintain a revenue stream and mitigate your losses if one location closes. Owning franchises in multiple counties or even states can be the best way to gain this kind of protection. For instance, if a hurricane damages my salon franchise in Florida, I’ll still have revenue coming in from Alabama and Tennessee as I rebuild.
The Cons of Multi-Unit Franchise Ownership
More Overhead
Naturally, multi-unit franchise ownership comes with higher overhead. If you open more than one location at a time, your lump startup costs will be more expensive. Your ongoing costs–payroll, rent or mortgage, utilities, and the like–will be higher, too. For this reason, multi-unit owners, especially, should have some financial cushion and be especially clear on how they’re going to get to profitability. Want to be a multi-unit owner but don’t have the resources to start out at that level? Don’t give up. Start with one franchise, make it profitable, then invest the profits to add another location.
Complexity
When you own multiple franchise units, everything gets more complicated. You have multiple locations, multiple sets of employees and vendors, multiple sets of financials, and multiple customer bases. If your locations are spread across counties or states, you may also have to spend a lot of time on the road and deal with varying regulations. Hiring good employees is always important, but it’s especially so for multi-unit franchise owners. Competent, trustworthy location managers and a good accountant can go a long way toward making the complexity more manageable.
Less Involvement
It’s simply not possible to be the sole owner-operator of several franchises–at least, not if you want to succeed. At minimum, you’ll need to hire an onsite manager for each location. Depending on how many locations you have and your own availability, you may also need a general manager: someone to oversee your location managers and handle day-to-day operations while you focus on strategy and financials. If you want to be an executive owner, this may not be a con for you. In fact, executive ownership and multi-unit ownership fit beautifully together. But if you’re a hands-on leader and want to work directly with customers, you may be better off owning just one location.
Fewer Options
Generally speaking, home-based franchising and multi-unit franchise ownership don’t mix. You might be able to do your own work from home, but the franchises themselves will need to be brick-and-mortar. For this reason and others, certain franchisors just don’t offer multi-unit ownership. You may also have a harder time passing down your business if you own multiple units–either because the franchisor doesn’t allow it, or because it’s simply a more complex business model. So while there are still a huge number of franchise options for aspiring multi-unit owners, it does reduce your flexibility somewhat.
If you’ve read both this post and last week’s and are still unsure which option is best for you, book a call with me–I’ll be happy to help you talk through the options!
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