All these are great reasons to get into franchising if you are very clear on your personal expectations and financial goals. If what you are trying to achieve is to build multiple streams of income, then ensure you treat your franchise as an investment for an additional source of income and do not expect a single franchise investment to be the ‘next big thing’ that turns your life from being a salaried employee to becoming the swash buckling businessman. Do not leave your job to operate the franchise when the financial projection of the business already reflects that it will not substitute your existing income. Do not operate under the illusion that under your excellent management skills, your outlet will outperform the financials offered by the franchisor.
If the projected profits from owning one outlet are not quite what you require in order to achieve your business objectives or to live the life you desire, you may have to consider owning more than 1 franchise outlet.
Owning Multiple Franchise Units has many business implications:
1. Greater upfront capital is needed
2. Greater cashflow planning to sustain the business till profits start to show
3. Risk is spread across outlets
4. Fixed costs are also spread across outlets
5. Create economies of scale (from Supplies and equipment)
6. More flexibility in HR Management
7. More say with the Franchisors
8. Profitability, once it breaks even it is accelerated
9. Less reliance on the franchisor
10. Running one unit and more than 3 units require a managerial mindset.
Multi-unit Franchising is becoming increasingly popular amongst both franchisors and franchisees, a fact that Multi-unit Franchising demonstrates growth and successful franchising as a business model.
Multi-unit Franchising may not be for everyone but for a seasoned business professional with good management and people skills with sufficient network and capital. This business model can prove to be an extremely good investment vehicle, making available funds work much harder than other more conventional investment tools.
In the UK, Dominos has 520 Outlets run by 135 franchisees (an average of 3.8 outlets owned by every franchisee). According to an article in the Business Franchise, Official magazine of The British Franchise Association, Domino’s targets to have 1000 Franchise units owned by just 200 Franchisees (bringing the average to 5 units owned by 1 franchisee). As an average, over 20% of Franchisees own multiple franchises, with each franchisee owning an average of 7 units each.
In the first 2 years of operating franchised units, the franchisees need to invest a lot of focus, time and resources but as they become more established and start building a track record, franchisees with a track record start to reap the rewards. With a strong track record, Multi-unit franchisees find it easier to secure new outlets, new business opoortunities, new funding from banks and very importantly, locations for new outlets.
The trick though, is to find the right franchise with which to grow. “ Growing the scale of any organisation, whether corporate owned or franchised units brings obvious benefits. Suddenly, you find that franchisors have more time for you, bankers and landlords want to meet with you, people want to work for you. In short, as we scale, the overall bargaining power of the company increases exponentially.” says Hsien Naidu, Principal consultant of Astreem consulting.
Whilst not for every investor, for the successful Multi-unit Franchisee, it is a business model that can potentially offer great financial and lifestyle profits.