A multi-unit franchise is an increasingly common arrangement where, as the franchisee, you operate more than one franchise unit. This differs from the traditional method of operating a single unit in a single location. Agreements for multi-unit franchises typically specify the number of units you will operate and your geographic territory.
Key Considerations for Multi-Unit Franchises
Choosing a multi-unit franchise is an important decision that requires a complete understanding of both your goals and the offerings of the franchise. Generally, some important considerations include:
- Initial investment: Operating a multi-unit franchise will require a higher level of investment or financing compared to a single unit, as each additional unit will increase costs. However, some franchises may offer discounts on their fees with the more units you operate. In those cases, a multi-unit deal may be better as a per-unit cost compared to acquiring a single unit.
- Management and hiring: Operators of a single-unit franchise can be more involved in the day-to-day management of the business. However, multiple unit franchises won’t afford the same opportunity to owners, especially if the geographic distance is greater between the units. You will have to rely more heavily on others to ensure the success of each unit’s operation. A multi-unit franchise may also provide more opportunities for employees, which can provide an advantage in retaining talent.
- Cost Sharing: A multi-unit franchise can provide you some savings on your investment, as you can likely share certain costs between your units. For example, you may be able to save on payment systems, marketing efforts, professional services, inventory and other standard costs.
- Diversification: Operating multiple units can be seen as a greater risk due to the overall increased investment. Conversely, a multi-unit franchise can provide a built-in hedge against that risk through diversification. As a multi-unit franchisee, you are not solely reliant on one unit for the success of the operation.
- Influence with the franchisor: You may benefit from more influence over the franchisor with multiple units, because you represent a larger portion of the franchise compared to a single-unit operator. This influence can be helpful as the franchise considers branding and other system decisions.
This list of important concepts for multi-unit franchises is not exhaustive. Added concerns might include the exclusivity of your geographic territory, the timelines for starting each unit and many others.
Additional Help Purchasing or Selling a Multi-Unit Franchise
The operation of a multi-unit franchise is much different than a single unit and comes with additional considerations that are unique to you and the franchise.
With deep experience and knowledge, Franchise & Business Law Group creates tailored approaches for its clients in their purchase, sale and operation of multi- and single-unit franchises. If you have questions about a multi-unit franchise opportunity, please contact our office to see how our services can help you.
Schedule a consultation with Franchise & Business Law Group today.