Multi-Unit Franchising: Pros & Cons of the Model

Operating a multi-unit franchise organization can be the key to finding true financial and time freedom. But perhaps you still have doubts about whether or not it is a model for you.

If so, keep reading because in this post you will learn the pros and cons of multi-unit franchising, compared to operating a one-unit franchise.

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Let's take a look at the difference between the two models.

If you buy a franchise and operate a single unit, or start a business with only one location managed by yourself, I have news for you: what you have is a job. Therefore, the results and profits you obtain depend on your performance and on how you manage that business.

This is especially true for small businesses that don't have enough volume or complexity to hire a manager to be in charge.

On the other hand, when you operate a multi-unit franchise enterprise with multiple units, sometimes even with different brands, you must have a leader in each store so they can function, as well as a robust structure that supports them. And, your role as a multi-unit franchisee, is to be the head of the entire organization.

Don't miss: 11 Benefits of Scaling to a Multi-Unit Franchise

Of course, as with everything, this model has its advantages and disadvantages, which I detail below.

The Pros & Cons of the Model

Before making a decision, you should consider the following six points: three pros and three cons (or less favorable, because I believe that all of them can be addressed and resolved for the better).

With them, you will be able to assess whether or not you are ready to be a multi-unit franchisee.

Pros

1. You will increase your income. It's simple math: having more units will give you more money. But there's a trick: that doesn't necessarily translate to more profits. Therefore, it is critical to properly manage your multi-unit enterprise so that there is more revenue and also more potential profits.
2. You'll be able to create a leadership infrastructure. Each of your stores will need a unit manager to take over the operations. Depending on how many units you buy over time, you'll eventually be able to hire a district manager.
   This leader will free you from the day-to-day operations, allowing you to adopt a more strategic role in your business.
3. You will be able to diversify your risk. When you have only one unit, you bet everything on that one store to do well, otherwise you lose your investment. But, by having multiple units, if one location doesn't go as expected, you have the others to balance and mitigate a financial problem.

Mini Tip: Overcoming risks with multi-unit franchising

Cons

1. The more you invest, the more risk you get. Each additional unit you purchase means more investment in the business. And the financial risk grows as the investment grows.
2. The business will become more complex. As you add more units, you also increase the company's administrative processes. So, you need the capacity and discipline, as well as the knowledge and structured systems, to manage the business efficiently and with positive results.
   It's not a minor issue: I've seen a lot of entrepreneurs who grew before they had solid systems and structure and this has made them fail.
3. A growing staff. The more units you have, the more staff you need to attract and retain. And with this increase in payroll will come more problems, stress, drama, and challenges. Also, a greater need to be a good leader and to hire the best leaders so that these teams can run the business in the best possible way.

Keep learning:  5 Ways to Find Leaders for Your Franchise

Is it convenient to have multiple units?

The answer to this question depends on what you're looking for in your life. Many people decide to open a business to run it themselves, have a job, and control their profits. And that's okay. 

Others, who are more restless, prefer to manage an area or territory with several locations and delegate to take a more strategic role in the business. That works too. Both answers are right for the right person.

Which path you choose depends on your goals when you started the business and what you want in the short, medium, and long term in terms of quality of life, time and return on investment.

No matter what you choose, you must implement franchise systems because this will allow you to manage your business in a disciplined way and with consistent results.

The good news: the American Franchise Academy is here to help you achieve that!

We have three leadership and management training programs:

• MANAGE, for  unit managers, assistant managers, and single-unit franchisees.
• LEAD, for new and developing multi-unit leaders and district managers.
• COMMAND, for multi-unit franchise owners.

All of them are designed to give the tools, knowledge, leadership, and management skills these professionals need to succeed in their roles. 

Learn more about our programs by clicking here!

Reflections:

• How do you see yourself in five years: operating a single unit or having a multi-unit franchise?
• How many units would you like to have?
• Do you have the skills, knowledge, discipline, and systems to support a multi-unit company?
• Are you willing to take the risk of owning a multi-unit franchise enterprise?