Franchisors and Multi-Unit Franchisees Team Up For Growth

Multi-unit franchisees control more than 200,000 franchise units in the United States.

By Therese Thilgen

Multi-unit franchisees dominate today’s marketplace, controlling more total units than their single-unit counterparts — and an increasing number are operating multiple brands. Franchisors, in tandem with the growing base of multi-unit operators, have recognized this change and responded by altering their sales approach, even their franchise disclosure documents to accommodate multiple-unit sales to experienced franchisees. The “three-pack” has grown to the five-pack and 10-pack, and we’re hearing more about deals to develop upwards of 50 or 100 units in territories that grow larger each year.  Franchisors, in tandem with the growing base of multi-unit operators, have recognized this change and responded by altering their sales approach, even their franchise disclosure documents to accommodate multiple-unit sales to experienced franchisees. The “three-pack” has grown to the five-pack and 10-pack, and we’re hearing more about deals to develop upwards of 50 or 100 units in territories that grow larger each year. ulti-unit franchisees dominate today’s marketplace, controlling more total units than their single-unit counterparts — and an increasing number are operating multiple brands.

The Best and Brightest

Franchisees are an optimistic lot, expansion-minded, on-the-grow, and always alert to new opportunities. And for them, multi-unit franchising represents one of today’s most attractive opportunities. Whether it involves increasing the number of units of their current brand or adding new brands to their holdings, the allure of multi-unit franchising is attracting the best and brightest franchisees in the business with increasing frequency. During the past 20 years, what began as a trickle has become one of the hottest vehicles for building a business rapidly and sustaining it through the years. FRANdata puts the number of multi-unit operators at more than 40,000, and they control more than 200,000 franchise units in the United States. Successful multi-unit operators are a different breed than the single-unit franchisees they are displacing. Light years beyond the old “buying a job” mentality, they are skilled, professional business executives who have chosen franchising as their business model. They possess the skills, training, capital, infrastructure and vision to keep adding units to their portfolio — without stressing their organization or their stomachs. Even during the recent economic upheaval, savvy multi-unit franchisees continued to expand, especially in QSR and services such as senior care, hair salons, massage, home maintenance, children’s activities, pet care and more. After all, if you can make money with one unit you can make even more with two, three or more, right? Well, yes — but it takes a certain skill set, dedication and infrastructure to make it all work effectively and efficiently. If you’re a regular reader of Multi-Unit Franchisee magazine, especially our ongoing profiles of successful multi-unit franchisees, you know exactly what we mean.

Right Pieces, Right Places

All the right pieces must be in all the right places for a multi-unit franchise organization to succeed. If they’re not, the results can be disastrous for both the franchisee and franchisor. At its best however, multi-unit franchising allows franchisees (and franchisors) to increase their unit count, market penetration and profitability more rapidly than a single-unit owner ever could. Multi-unit franchising has already altered the landscape of franchising in many ways and will continue to do so. In recent years, private equity has “discovered” the profit potential of multi-unit franchise organizations or acquiring them outright — even doing the same with franchisors. And they appreciate the benefits and value of a diversified portfolio. In other words, while multi-unit franchising is the way to go for any franchisee seriously looking to grow his organization, it’s not for everyone and it’s far from easy. In fact it’s hard work, and not without risks. Successful multi-unit franchisees must do at least three things well:

1. Finance the additional locations/territories. That means deep pockets or at least access to deep pockets. This often requires business partners or lenders who then have “skin in the game” and can influence the way a franchisee conducts his business. This is an important reality to keep in mind for franchisees and franchisors.
2. Form an organization with a management team and infrastructure to command the expanding enterprise. Franchisees can remain hands-on with a handful of units, but when they reach 10 or more it’s no longer feasible to oversee day-to-day operations. At some point, the franchisee will need to bring in a team to handle everything from operations to finance to marketing and HR. He’ll need to learn to delegate and get out of the way.
3. Leadership is the final ingredient. Franchisees have vision, ambition and inspiration. The challenge is communicating these crucial intangibles to the expanding organization and keeping them intact as they filter down to the multi-unit managers and front-line staff through the in-house team. This is necessary and achievable; never simple nor easy.

For those who have the backgrounds, experience and drive to take on these challenges, multi-unit franchising offers a path to achieve their dreams. They are looking for the best brands to help grow their enterprises. But franchisees can’t do it alone. They must rely on people, partners and task delegation, along with large helpings of passion, patience, dedication and hard work. They also need a strong franchisor who understands multi-unit franchising and is actively seeking experienced operators to help penetrate new markets quickly and effectively. Together, franchisors and multi-unit franchisees make the perfect team for growth.

Therese Thilgen is CEO of Franchise Update Media.  Find her a fransocial.franchise.org.