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Multi-Unit Franchising Provides Advantages for Franchisees and Franchisors

by Ed Teixeira

Franchisees and franchisors can benefit from the multi-unit franchise model.

A recent study revealed more growth in multi-unit franchise ownership especially in the restaurant franchise sector. The popularity of multi-unit franchising is based upon several factors:

  1. Franchisors can have a large franchise network and still deal with less franchisees
  2. Franchisee candidates that seek and qualify for multiple units tend to better capitalized and more business savvy compared to unit franchisee candidates
  3. Franchisees, that grow into multi-unit ownership, have a successful track record
  4. Complimentary but non-competitive franchise brands can work well under multi-unit programs
  5. Successful multi-unit owners will usually be more self reliant requiring less franchisor support
  6. Multi-unit franchisees by virtue of their organizational and financial resources can achieve higher unit revenues. Some may have highly successful existing businesses.
  7. Franchisors converting corporate owned units to franchises have a potential ready market of buyers with multi-unit franchisees

There are significant benefits that franchisors can realize by utilizing multi-unit franchising to grow their franchise network. However, there can be problems if franchisors deviate from franchising to qualified candidates.  These pitfalls include:

  1. Franchising additional units to franchisees before the franchisees have established a successful track record with their existing franchise unit(s).
  2. Franchising additional units to undercapitalized franchisees. In their zeal to add units a franchisor may provide financing to current franchisees that exceed their ability to service the debt
  3. Accepting marginal candidates for multi-unit franchises in order to receive multiple franchise fees
  4. Certain franchisors use the multi-unit concept as a way to tout fast system growth

Franchisors that look to the multi-unit franchise model, as a vehicle for growth, need to limit the granting of franchises to well capitalized and qualified candidates and consider the long term advantages versus short term gains.

2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com

 

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