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As a business owner, what’s better than a profitable location?
Two, three or even a dozen more profitable locations.
For franchise owners and candidates who wish to go big or go home, a multi-unit empire can be an advantageous way to exponentially increase your territory, income and portfolio. Most multi-unit owners begin with a single location, get that business up and running until it’s in the black, then consider a second or third location for expansion. But a few daring entrepreneurs choose the multi-unit option right off the bat, typically with a carefully crafted franchise agreement that spells out the incremental growth plan and opening dates, then get to work on scaling up their operation. If those additional locations prove to be successful and profitable as well, multi-unit ownership can be the ticket to an enviable business ownership portfolio.
If you haven’t yet considered owning a multi-unit franchise operation, here are four convincing reasons to give it a look.
1. Room to negotiate
When you’re prepared to take on the prospect of multiple franchise locations, the financial risk you assume is also multiplied. Since franchisors are eager to open and establish as many units as possible, the risk you’re willing to presume may provide room to negotiate better terms. It’s quite typical for franchisors to offer discounted franchise fees upfront, as well as reduced royalty payments over time — even up to and including waiving them for a set period. These negotiations can also extend to your guaranteed territorial boundaries.
In a perfect world, you might even carve out an impenetrable area, open only to the competition. Once your locations are up and running, you can also apply for better terms from vendors and suppliers, knowing that the amounts you order for goods and services will exceed any single owner operation.
2. Replication makes expansion an easier proposition
If you’ve ever adopted a pet dog or cat, you might hear the local Humane Society representative explain that two adopted animals are not much more trouble than one, as the pet will have one another to play with and stay amused. In a technical sense, that’s also the argument for exploring multi-unit franchise ownership.
The proven business models of franchise systems are constructed to operate precisely the same, regardless of the location. This means your downtown location would have the same resources, vendors, staffing needs and operating procedures as your location in the suburbs. But because the replication of an additional unit is modeled on your existing location, you already know exactly what resources are required for expansion. And, once you’ve established a second location, you can easily share resources among the two businesses. When you go from one unit to multiple units, replicating your operation makes expansion that much easier of a proposition.
3. Economies of scale
Multiple franchise locations afford an owner with the economy-of-scale advantage. Any of your fixed operating costs can be spread out among two, three or even more locations. This includes any advertising, marketing and bulk inventory purchases. If you have an established staff, you can also rotate in the more experienced workers to help train the new crew until they get up to speed. By dispersing the fixed costs of your full operation, you can generate efficiencies across the full spectrum of your balance sheet, increase your profits margins and over time, enjoy a much greater ROI.
4. Respectability and credibility
As with any business owner, the bigger your enterprise, the more clout you carry. This extends to your influence within your community and your customer base, as well as the suits back in the franchise brand’s corporate office. When you finally get several locations performing with one another like a well-oiled machine, it’s a credit to your business acumen and leadership qualities. Your franchisor certainly understands the initial risk and burden you took on in the beginning and will likely reward your effort with more inclusion in the brand’s direction. You may find that your opinions, ideas and strategies carry some weight — not just with the corporate office, but also with the other franchisees in your system.
According to statistics from FRANdata, a leading franchise research firm, it’s estimated that multi-unit owners manage over half (54%) of all franchise locations in the U.S. It appears the majority got the message that owning more than one location has its advantages. However, that’s not to say that the multi-unit ownership route isn’t without its own set of risks. As with any other aspect of the franchising industry, it’s advisable to do the proper amount of due diligence and research before making any final decisions.