Industry Trends, TES Insights
The Future of Franchising is Multi-Unit
If you’re a franchisee looking to expand, you have several options.
One is to open multiple locations under a single brand. Multi-unit franchise owners control over half of all franchise units in the country. And they are a rapidly expanding segment of the franchise industry.
Growth Opportunities
The Future of Franchising is Multi-Unit.
As the name implies, a multi-unit franchise is a business that owns and operates several distinct franchise locations within a single geographical area. Multi-unit operators have the advantage of lower support costs and can earn higher ROIs than single-unit franchise owners.
Multi-unit franchises can be ideal for franchisees with the resources to open multiple units of a particular brand. These franchisees are often empire builders with the vision, skills and financial wherewithal to manage and grow their businesses successfully.
In addition, many franchisors will offer financial incentives to those who purchase more than one unit. This can include a reduced initial franchise fee or lower royalties on units that reach certain revenue milestones.
The benefits of multi-unit franchise ownership appeal to investors who want to diversify their revenue sources and reduce risk in a volatile economy. FRAN data reports that the number of multi-unit franchises in the United States has exploded over the last few years.
According to the research, fast food chains and sit-down restaurants control the largest share of multi-unit franchises. However, industries such as home health care, flooring services, beauty salons and barbershops, gyms and fitness studios, pizza restaurants, and coffeehouses are also growing rapidly.
As a multi-unit franchisee, you have the opportunity to build a strong network of local partners who can help you expand your business. This can make the process of opening new units a lot easier for you and your team. Another critical factor in the success of multi-unit franchisees is the ability to develop a growth plan. The franchisee and franchisor will typically work together to set a timeline for opening each unit. This helps you focus on growing your business and allows you to apply your resources more efficiently, maximizing your ROI.
Besides these apparent benefits, multi-unit franchise owners tend to have more experience and a better understanding of their brands and operations. They are also more likely to be able to overcome challenges associated with running multiple units, such as staffing issues and operational standards. In addition, they may have a more entrepreneurial mindset and can adapt their strategies to changing market conditions or new opportunities.
Economies of Scale
Economies of Scale are when a company decreases the product cost as output increases. This is achieved internally or externally, and it happens when a firm improves its technology, finds cheaper labor, or buys materials in bulk.
A company can also achieve economies of scale if it is part of a larger industry, such as in a geographic area where other firms exist, or if it benefits from lower transportation costs. These external economies of scale occur because more companies are in the same market. They benefit from a more efficient labor pool, access to cheap materials or components, and better transport routes.
“One of the most significant advantages of a franchise is that you can build your business on an economy of scale, meaning that you can grow your business with less capital investment and more success. This is particularly true if you are a multi-unit franchise owner.”
As a multi-unit franchise owner, you gain economies of scale in inventory buying, advertising, marketing, staffing, and training because these expenses are shared across multiple locations. The resulting benefits are high ROIs and financial success for you as a franchise owner and your franchisor. In addition, you can save money on other products that are purchased in volume. This is especially beneficial in low-margin industries where the fewer items you buy, the less you pay per item.
However, economies of scale do have limits. These limits can include passing the optimum design point when the average cost of producing an additional unit increases or saturates the regional market. External factors, such as a shortage of raw materials or a lack of specialized labor in an area, can also limit economies of scale.
Economies of scale are essential for businesses because they help to create long-term economic advantages. They can reduce prices, provide greater consumer access to products, and make it easier for companies to reinvest in research and development. In turn, these benefits can result in improved products and higher real wages for workers.
Investing in a Brand
Whether a first-time business owner or a franchisee, investing in your brand is critical to success; with the right marketing strategies and investments, your brand will bring new customers to your business, generate more sales, and increase your bottom line.
Brand building requires many resources, from time and dollars to approvals and people. You can get the support you need from the people in your organization who share your goals and values – and even from outside parties, such as investors or partners.
Your brand is the foundation that supports all of your marketing and sales efforts, and it also keeps the audience coming back to your business. This is because your brand helps to set a confident expectation with consumers, giving them the emotional connection, they need to be loyal to your products or services.
When you have a strong brand, you’ll be able to reach more consumers and attract more employees. This can help you open your doors more quickly and reach profitability quicker.
Another benefit of franchises is that you can often access a well-established consumer base and potential staff pool in your area. This is a massive advantage if you’re trying to open a new business in a town without much growth or development.
You’ll also have an easier time attracting capital for your business when you are part of a franchise network. Lenders are more likely to approve loans when they know that an established name and proven track record back your business.
The best way to invest in your brand is to clearly understand your goals and how your brand can help you meet them. This will allow you to create a plan tailored to your needs and make it easier to convince others to invest in your brand as well. Your brand should also be diversified, as this will reduce your overall risk in the event of market disruption or possible recessions. This will reduce the likelihood that one disaster will hit all of your assets and increase the odds that you’ll enjoy a steady stream of high-return investments.
Investing in a Franchise
The Future of Franchising is Multi-Unit.
Investing in a franchise can be one of an investor’s most lucrative business ventures, but it comes with risk. It’s essential to do your due diligence, research extensively, and learn about the brands you’re considering.
When it comes to a franchise, the most critical factor is whether or not the franchisor has a proven track record and can support you in achieving your goals. The best way to make this decision is to conduct a thorough search, talk to current and former franchisees, and determine how successful the brand has been. In addition, ask about the company’s support system for new owners. Having a solid support team will go a long way in helping you succeed and avoid common mistakes that many franchisees experience.
Another advantage of investing in a franchise is that it provides investors with a proven business model. A proven business model is an effective way to mitigate risk, as the franchisor has faced similar challenges and knows how to avoid them in the future. It’s also important to consider how much support and training the franchisor will provide for the new franchisee. This will help the new franchisee understand and be familiar with the systems and processes they must follow to run their business successfully.
A franchise is also more likely to secure financing than an independent business owner, as lenders have confidence in the brand’s reputation and ability to generate revenue. In addition, franchisors often offer investment discounts that can reduce initial costs and increase the profit potential. The franchisor can also negotiate better prices on products and services for its franchisees and lower rates for equipment and supplies that the individual stores might need help to get. This can give franchisees a significant boost in profits.
Depending on the size of the franchise system, the cost savings may be more than a franchisee’s initial investment. This is because the franchisor has a larger budget and can negotiate lower prices for its franchisees.