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Multi-Unit Franchise Ownership: Double the Profits (and Headaches?)

Multi-unit franchising

Multi-unit franchising

You have done your due diligence well – You have searched and evaluated dozens of franchise opportunities you are interested in, and you have finally picked the one suit you best. And your hard work proves right – Your franchise unit is profitable and growing well.

The idea of multi-unit franchise ownership – owning more than one franchise units of the same franchise company – is suddenly pop out of your head.

On paper, the idea looks good: If you own a franchise unit, owning two of the same franchise is double the fun, right? Maybe. Maybe not.

The opportunities of multi-unit franchising

Being in the same franchise system for quite some time familiarise you with the franchise system’s procedures and policies. You are also familiar with your franchisor, including the franchise company’s vision, dynamics and character (as a company and of each personnel.)

I once own and manage multi-unit franchise of the same brand name, and what drove me in deciding to go multi-unit rather than seek other opportunities is due to a much shorter learning curve into the franchise systems. I also have built credibility with the franchisor and have a good relationship with the people, from the CEO to the janitor of the head office.

And here’s the best thing of multi-unit franchising – You can shuffle your employees around, helping you in finding the best ‘chemistry’ (and the best talents) that will eventually improve your franchise units performance.

The risks of multi-unit franchising

Unfortunately, everything upside always comes with a downside.

Opening a second location will drain your resources in one way or another that will most likely include your first franchise unit’s profits. Remember, opening a new location always involves a certain period of time where your new franchise unit loses you money until it reaches break-even point.

And that’s where all the problems started from. There is always a risk that your new franchise unit turns out to be a bad location that results in poor revenue and it will, eventually, becoming a loss-making business.

A loss-making second franchise unit will drag your first franchise unit down. I have proved this myself in the past – You don’t have to.

Moreover, managing two locations require you to be able to delegate and relieve some controls to your employees. And in my very own experience, delegating is not as simple as you might think. The worst of delegation is you need to allow mistakes to be made in your Store Managers’ decision making process, and the mistakes could be critical and fatal.

To go multi-unit or not?

A cliche answer would be: It depends on many issues.

I prefer to answer the question this way: If you feel you can work with the same franchise company (and with the same people and the same system, along with the transformation along the way) for the next 10 years or so, given the franchise is thriving and sustaining challenges, I think you should go for multi-unit franchise ownership.

Otherwise, I suggest you to consider your options, including seeking other franchise or business opportunities to invest in. It is wise to position yourself and your business in a safe(r) place, especially in today’s uncertain economic situation.

Ivan Widjaya
Multi-unit franchising
Image by woodleywonderworks.

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