What is Multi-Unit Franchising?
As the name implies, multi-unit franchising is when a franchisee owns multiple franchise units.
For example, if you purchase a Subway franchise and you find success with it, you may find yourself opening an additional location within just a few years.
Another way of thinking of multi-unit franchising is purchasing various franchises in the same territory which complement each other.
The benefit?
Imagine you open a lawn care franchise such as The Grounds Guys. Now you have a client base in your territory of individuals/families with homes. What do homes have? Windows. What do windows need? Coverings! So to complement your lawn care franchise, you could purchase a window coverings franchise such as Budget Blinds. Now you have two services to offer the same client base. Of course, for this to be possible the two franchises you are considering have to be available in your territory.
So how do you go from one franchise, to two, to three, to hundreds?
Shaq can help us here!
Did you know that at one point Shaquille O’Neal owned 155 Five Guys franchises? He also owns 17 Auntie Anne’s, 9 Papa John’s, 40 gyms, and 150 car washes. WOW! What a stud. When you look up multi-unit franchising in the dictionary, all you’ll see is a picture of Shaq!
The path to achieve multi-unit franchising is not for everyone.
It takes a certain level of dedication, consistency, determination, and financial acumen to get you there. Here are a few tips:
Steps to Achieve Multi-Unit Franchise Ownership
- Observe – Watch multi-unit owners in your brand. What makes them tick? What is their profile? How did they achieve their success? If you want to be one of the best, you have to surround yourself by the best.
- Work – Yes, work is involved. A lot of it. If you’ve been blessed with single-unit franchise ownership, work hard to understand how it works and maximize the investment you achieve with it. A franchise is not something you buy and then it just makes you money. Your action, or inaction, will directly result in your over- or underperformance.
- Measure – What are the key performance indicators (KPIs) for your franchise and your territory? Are you accurately tracking your numbers to know where you fall? Are you reviewing your performance, and making adjustments as needed?
- Be Open to Change – If you are not hitting your KPIs, not extracting a decent return from your franchise investment, not saving…guess what? Opening a second unit is likely out of the cards for you. If what you are currently doing is not working, change it! Be open to listening to and adhering to advice from experts around you, whether it be from other successful franchise owners or professionals who build success franchise owners.
- Remember Your Objective – Why did you start a franchise in the first place? Maybe you just wanted a little extra side income for yourself or your family, and that’s great. However, if you purchased a franchise because you want to actually build wealth and retirement, one unit simply will not cut it in the long run (in most cases). You need to expand and to do that, you need to have a plan of expansion to do it. so always remember your goal or your objective as you’re moving along.
The good news is you don’t have to have money in hand to open a second or third unit of a franchise. You have to have some but as long as you have about 10 to 20% to put down on the initial franchise fee, you can obtain a loan to cover the rest. This is a concept called leverage.
You can continue to expand while using loans from banks or financial institutions to fund your expansion.
If you’re looking to take that next step and purchase your next unit, or if you’re not quite sure where to start but want to move toward multi-unit ownership, we’re here to help.
To Your Success!
Your Franchise CPA,
John Mollica – CPA & CISA
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