Multi-Unit Franchising – As an Expansion Strategy

Post Date: May 1, 2015

There’s a saying: “Be in business for yourself, but not by yourself.”

Today almost half of all franchised units are owned by multi-unit franchisees. Multi-unit franchising creates the opportunity for a franchisee to open more than one unit. In this case, multiple units are sometimes sold at a reduced rate per unit.

The franchisee maybe less involved in the day-to-day operations of the unit. Instead, the multi-unit franchisee manages all the locations at a higher level, usually hiring managers and staff for each location to perform the daily operations.

An Overview

Many franchisees that choose multi-unit franchising as an expansion strategy do so after they have been franchising and know the ins and outs of the franchising business.

There are primarily two types of multi-unit franchise agreements:

    1. Area development agreements 
    2. Area representative agreements (also known as master franchise agreements)

Most research studies find that 80% of franchisees are single-unit operators and 20% are multi-unit operators.

Many multi-unit franchisee systems are concentrated in six industry categories: automotive, fast food, personnel services, restaurants, retail, and service businesses.

Why do franchisees choose multi-unit franchising as an expansion strategy?

      • System Growth
      • Achieve Greater Operating Efficiencies 
      • Economies of Scale 
      • Market Strategy 
      • Reduce training 
      • Easier to Manage Franchise System

Multi-Unit Franchise Financing

Divide and conquer. When looking at the total amount of capital you need to borrow to get started, consider using a variety of sources including SBA loans, alternative funding, and franchise loan packages. Lenders know that franchise businesses have a higher possibility of success because there are already proven set models that work for those businesses; otherwise there wouldn’t be an expansion.

While the current economy does not allow lenders to indiscriminately approve loans, there is a good chance of a well-presented business franchise loan being approved, especially in comparison to a start-up business that’s brand new. Many franchisors offer discounts to veterans, minorities, and women.

To learn more about multi-unit franchise funding strategies, speak to a Benetrends consultant.

Categories: Blog