If you are looking to solidify your success as a franchise owner, expanding your portfolio beyond a single location is essential. Many entrepreneurs just like you are building their wealth, increasing their presence and stepping towards financial freedom by moving into multi-unit franchising. But scaling from one location to a franchise empire involves more than simply signing on the dotted line.

From securing funding to strategizing your approach across multiple units, it’s a move that requires careful planning and consideration. Nevertheless, when done right, it can be highly rewarding. If you are wondering where to begin when expanding into multi-unit franchising, you are not alone. Here’s everything you need to know.

What is a Multi-Unit Franchise?

In a single franchise model, you purchase one outlet. Your franchise model is classed as multi-unit when you expand your portfolio beyond the single outlet. You could operate multiple outlets in a single region or spread your business across various areas. It’s an approach often preferred by franchisors because it speeds up their growth and saves them from investing time and money into recruiting new franchisees.

When you move into multi-unit franchising, your role could become more operational. You might consider taking on sub-franchisees to manage the day to day running of each individual outlet to give you time to take care of management and coordination.

Benefits of Multi-Unit Franchising

There is a reason why over 50% of franchises in the US are owned by multi-unit franchisees. So although the prospect of expanding into multi-unit franchising may seem daunting, it can be a highly rewarding move. Here are some of the biggest benefits.

Stability

With multiple income streams, you are spreading the risk and the reward across multiple units. So if one location sees a decline in sales, it is supported by the success of the other units. The more units that you own, the more secure your business is. So the greater the size of your portfolio, the more stability you will see.

Cost Efficiency

It’s no secret that when buying inventory or equipment, the more you buy, the cheaper the price. By expanding into multi-unit franchising, you can reap this benefit, sourcing everything you need to to operate at a better rate. Your HR operations and accounting can be centralized, as can your senior management team. In short, the more units you open, the cheaper each unit becomes to run.

Growth

With multiple income streams and cheaper inventory and equipment costs, the faster your business will grow and generate profit. And having already built your single unit into a fully functioning business, you can make good decisions when expanding which could drastically reduce the time, money and energy needed to get a second or perhaps third franchise set up.

Challenges You Might Face

It’s important to note that although multi-unit franchising can be rewarding, there are challenges that you might face along the way.

Funding

More units mean more funding and more fees. The investment that you need to make to expand into additional franchise units can be large and securing such funding can be difficult. Unless you have personal savings, you may need to be prepared to take on significant loans to get your new units set up.

Complexity

Managing multiple franchise units is much more complex than managing a single outlet. It involves a different set of skills and greater coordination to ensure that each location is functioning optimally. You might need to find sub-franchisees to run each location on a day-to-day basis and be willing to let go of some of the control that you have previously held, trusting others to hold the fort while you work on the bigger picture.

Pressure

Regardless of the amount of pressure you are feeling as a single-unit franchise owner, you can expect it to increase if you take the step to multi-unit franchising. Your performance will be monitored by your franchisors and you will have a larger team of people that are depending on the success of your business.

How to Ensure Success

When it comes to achieving success as a multi-unit franchisee, here are some best practices to follow.

• Expand Intentionally: Just because a franchise unit is up for sale, doesn’t mean that it’s the right one for you. You should expand intentionally and ensure that you have a robust business plan in place before committing to the unit.
• Maintain a Good Cash Flow: Running a franchise can be costly and the demand for cash flow only increases with additional outlets. Maintaining a good cash flow is essential for success. Ensuring that you have a reserve will alleviate the pressure of a slow start as well as cover any unforeseen expenses.
• Establish Standards: The more that you can standardize, the smoother you will find the transition into multi-unit franchising. From operational workflows to reporting, training programs to quality control, ensuring that they are watertight will be advantageous during your expansion.
• Centralize Operations: For a seamless transition, centralizing your operations is key. Consider your HR operations, your accounting software, your CRM systems and more. It will save time, money and stress to start with centralization rather than try to merge at a later date.
• Foster Good Management: By giving attention to your management team and employees from day one, you will ensure good working relationships that will make operations easier. Consider communications channels, meeting schedules, performance reviews and more to boost morale, ensure accountability and reward success.
• Invest in Yourself: Your franchise units are an extension of yourself. If you are feeling the pressure, your management team and employees will feel it too. By investing in yourself, you will be best prepared for the journey you are looking to embark on. Consider enrolling on a franchise training or coaching course that can support you through the transition.

Common Mistakes to Avoid

For the most part, expansion is always a good choice. And if a franchisee has failed, it’s often to do with their approach rather than their decision to expand. Here are some common mistakes to avoid:

• Scaling too fast without a proper framework in place.
• Hiring the wrong candidates.
• Losing sight of your cash flow.
• Choosing the wrong franchise location.
• Trying to micro-manage instead of delegating.

Why a Robust Business Plan is Essential

Regardless of whether you are looking to purchase a second unit or multiple, a solid business plan is non-negotiable. It enables you to:

• Assess whether the location that you are looking at is a good investment.
• Uncover whether there is the market demand within your industry and potential new location.
• Understand whether you have the capital available to expand.
• Demonstrate to potential lenders that you have thought through your purchase.
• Weigh up the benefits of expanding to identify whether the risk is worth the reward.
• Identify any risks that may be involved and consider how to manage these.

…and more. When creating your business plan, you should prioritize operational readiness and choose a franchise location that as high potential for a good return on investment. It’s important not to be swept up with time and consider the location with the most potential, not the quickest to get open.

Geographic and demographic studies should also be undertaken as these can help with your decision making.

Securing a Scalable Franchise Business

The last thing you want to do is invest your time, money and empire into a franchise that’s just not scalable. In order to succeed in your expansion, you need to secure a franchise that has strong promise. Here’s what you should look for:

Potential

Some franchise concepts work great for a single outlet, some work great for multiple outlets, and some are excellent for both. You should ensure that the business model is replicable including whether training and management can be standardized. If so, it will have strong potential for successful expansion.

Stability

You should look for a franchisor that has proven success, a long-term vision and a desire for expansion. And remember not to get swept up in promises. Doing your due diligence to ensure that the brand you choose to work with is stable. It will bring security for you as both a single-unit and multi-unit franchise owner.

Flexibility

You should ensure that your agreement has flexibility that will help you to expand. Do the terms of the franchise offer discounts for multiple units? Do they vary from unit to unit depending on the geographic location? Your terms should be adapted for the territory that you are operating in.

Support

Good assistance from your franchisor is essential when you have aspirations of becoming a multi-unit franchise owner. You will need their help, training and support to succeed. During negotiations, you should ensure that your agreement allows for growth such as territory rights. This will best protect your business long term.

Determining the Right Time to Expand Your Business Portfolio

Wondering when is the right time to expand your single-unit franchise into a multi-unit empire? It’s something you can start considering from day one. You should consider your long-term growth strategy when purchasing your first unit. Are you content with being just a single-unit franchise owner or do you aspire to expand into multiple units? The following suggests that you are ready to expand:

• You are achieving good profitability in your current unit.
• You are able to step away from management with confidence in your team to run the day to day.
• You have robust workflows, systems and processes in place.
• You have a good working relationship with your franchisor.
• You have access to the funds needed to expand your portfolio.

If you meet all of these criteria, it could be time to start scaling your business.

FAQs

What Funding Options do I Have When Expanding my Franchise Portfolio?

When expanding your portfolio, there are many funding options available to you. Firstly, you could use personal savings or cash flow from your existing unit. These are usually quick to access but the risk level is higher. Alternatively, you could look at loans and other financing options.

From Small Business Administration (SBA) loans to Rollovers as Business Start-ups (ROBS), home equity loans to asset financing, there are plenty of options to consider that will allow you to achieve your dream of becoming a multi-unit franchise owner.

What Industries are Good for Multi-Unit Franchising?

Not all industries suit a business model that encompasses multiple units. So it’s essential to find a scalable business model that aligns with your long term aspirations. Look at industries that will be in constant demand such as health and fitness, home services, real estate and travel and hospitality. But ensure that you are smart in your expansion.

If your business model is a gym or recreational facility, you should consider proximity when opening a second. In instances like these, remember that your second or third units should maximize coverage rather than take customers away from your first unit.

Should I Choose a Brand That is Already a Household Name?

It’s easy to fall into the trap of assuming that brand recognition will transform into profitability. While this is the case in some instances, the real driver is your marketing strategy. By prioritizing potential over name recognition, you can seek out opportunities for true growth and firmly secure your place in the industry. To really succeed as a multi-unit franchisee, you should be looking at brands that are in high demand yet have limited competition.

How Guerrilla Franchising Can Support Your Move to Multi-Unit Franchising

Working with a franchise coach can really set your move to multi-unit franchising up for success. At Guerrilla Franchising, you will be guided through your journey to ensure that you make all of the right decisions during your expansion. By consulting an expert, you are better able to find a franchise model that will move you towards your goals. Want to find out more information? Schedule your free consultation call today.