The Signs You’re Ready for Multi-Unit Franchise Ownership

Among the nearly 850,000 franchise establishments in the U.S., almost half are operated by owners with more than one location – multi-unit franchisees. These individuals have had to invest significant capital, go through comprehensive training, launch the business, endure the growing pains that inevitably come with expansion and growth and reach the breakeven point. Only then can profitability enter the picture.

It’s totally normal to think of expanding at a time like this, yet many still remain hesitant. Some figure if things are going so well, why rock the boat and put the entire operation at financial risk? Others are simply content to sit back and maintain a single unit establishment, where they can focus 100% of their time ensuring things remain smooth. Without a doubt, the decision to expand to multiple units takes some serious contemplation. But for those looking for that elusive reassurance, here are some positive signs you should consider multi-unit expansion.

Related: Considering Becoming a Multi-Unit Franchise Operator of a New Brand? Here’s What You Should Know First.

Be honest with yourself

Before you can consider expanding your single unit into a multi-unit empire, you need to be completely honest with yourself. As in, are you really doing as well as you think you are? In times such as these, it certainly doesn’t hurt to get an unbiased opinion, which could easily come from your financial planner or accountant – provided they’re bound by the fiduciary rule and have your best interests at heart.

Open the books and conduct an accurate review of your financial performance and determine if you’re meeting – and possibly exceeding – the franchisor’s benchmarks for success.

Related: If You Want to Own More Than One Franchise Unit, These Are the Brands to Check Out

Labor and demand

Two factors that will play an important role in your decision is your labor situation and the local market demand for your product or service. In survey after survey, many of the top complaints from franchise owners is they don’t have a reliable or stable workforce. Turns out, it is hard to find good help these days. If you’re fortunate enough to have an excellent general manager at your current location, will you be able to find a similar performer for the new one? Should you consider splitting up your staff among the two locations and hiring the infill positions? Either way, this can be a big risk.

Then there’s the local market demand to consider. While business may be booming at your current location, will the demographic makeup of the additional territory be the same? In a perfect world, the demand may be similar, but it likely won’t be identical.

Related: This Is the Key Factor for Hiring a Cohesive Team

The benefits of multi-unit ownership

When you own more than one franchise location, everything gets multiplied — your investment, your staff, your inventory, your marketing spend and, hopefully, your bottom line. It’s the ultimate risk/reward situation, so you have to take a strategic and cautious approach to scale properly. Now, take a look at the potential advantages that come with multi-unit ownership:

• You gain multiple revenue streams, which can greatly increase your income and wealth
• At the same time, you can spread your fixed costs across multiple locations
• You can negotiate better terms among your vendors and suppliers with bulk supply orders
• Your visibility in the local market can double or even triple, making it harder on the competition
• You can diversify your operational risk amongst the multiple locations
• Your total valuation for an eventual sale will greatly increase, creating an attractive exit strategy
• You’re doubling or tripling your ability to build long-term wealth

You may have enjoyed reading through each of those benefits, but before you go out and make a rash decision about expanding, you might want to consider an exercise you conducted the first time around: validation. Unless you’re the first owner among an emerging brand, it’s highly likely that someone in your franchise network is a multi-unit owner. So, reach out to them and get a good reading on their own multi-unit expansion experience. Find out where the hidden pitfalls lie and make plans to circumvent any trouble when you finally decide to double or triple down on your investment.

Above all, expect a setback or two. Multi-unit expansions rarely come off without a hitch. If you’re bold enough to consider making a move that could double or triple your business, always proceed with caution. Because the last thing you want to have on your hands are two struggling locations, as opposed to a single establishment that was thriving.

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