The Pros and Cons of a Multi-Brand Franchise EnterpriseJul 13, 2021
Should you multi-unit and multi-brand your business? There are clear advantages to choosing this multi-unit path: when you operate multiple locations, you become the owner of an enterprise that grows, you can delegate operations and generate enough money for you to find your financial and time freedom.
On the other hand, if you operate a single unit, the franchise becomes more like a job, because you have to open and close your business and also manage it since you don’t have enough cash flow to hire a district manager and delegate the operations.
But to obtain the desired outcome in the multi-brand model you need to have the right systems, the right knowledge, the right tools and processes to manage your business. But first things first. Let’s review what are the pros and cons of this franchise modality.
Pros of a multi-brand franchises
- You will have diversification
Having a multi-brand franchise will diversify your investment and your risk in case one of the brands that you choose didn't work. Remember that not all brands are created equal, and even if you did all the research and diligence before investing, things can go wrong.
- You’ll be protected
If you invest in franchises from different industries, then you won’t have ‘all your eggs in one basket, as we say. That way, if one industry does better than the other, the economy goes down or the consumption habits change, you’ll be able to mitigate the risk and overcome that downturn.
Cons of a multi-brand franchise
- Lost synergies
If you operate a multi-unit model of the same brand, the synergies can really help you. For example: if a store needs to cover sick leave, a rush hour, or there’s a new opening, the business owner may ‘borrow’ employees from another location. Since they are trained under the same disciplined systems they can work at any store and provide support when needed. This is also useful when vacancies occur since the employees become recruitment sources and the company can take advantage of internal promotion.
Another important synergy relates to the product. If you run out of product in one of the units, you can go to the closest store to get what you need for the other location. That gives you a sort of inventory insurance.
The systems also benefit. When you invest in a brand, you acquire the rights to duplicate the product or service, the image, and the nationwide marketing of that franchise. But then you have to create the management systems for your business: how to hire and retain people, how to pay them, how to control your costs, how to do your inventories, how to manage the financials, and how to read and understand your numbers. Once you figure out how to do it, you can replicate that success on the other units of the same brand.
Unfortunately, when you run units from multiple brands, all of these benefits disappear since the management and human resources systems, as well as the products, are different and you cannot duplicate or transfer that knowledge.
- You lose focus
There is huge value in having the focus on just one business because all of your energy goes to understanding, learning, managing, and developing strategies and systems to succeed in a single business. As a result, you’ll be able to elevate that business to the next level more easily.
But when you have a multi-brand enterprise, you’ll need to multitask, something that very few people can do (I know I definitely cannot). You’ll have to split your time and to do things simultaneously from different places, and do them really well so that the other ones don’t suffer. Your support team will also require the ability to switch from one brand to the other seamlessly so that all of your stores can work properly.
4 recommendations to operating a multi-brand franchise
Operating a multi-brand enterprise is a great way to achieving financial al time freedom. Surely, it’s not a challenge made for many entrepreneurs, but it’s not an unrealistic dream.
Not long ago, I interviewed a good friend of mine who has a multi-unit multi-brand company, with 65 units of Popeye's and Burger King. Want to know how he does it? Subscribe to my YouTube channel and check out my interview with him.
If you want to operate a successful multi-unit multi-brand corporation, here are four things you should consider before investing:
- If you want to be a multi-unit franchisee, when you research your brand options investigate if there’s an area agreement available in your area. If not, you won’t be able to grow.
- If you are already committed to a brand, stick to it until you have at least three district manager areas, with an average of six units per district manager. There are many reasons for that, but that will be a subject for another blog post.
- Make sure that your area and your business are running like clockwork before you acquire another brand. That means that you have all the business management systems in place so that you can continue to run and duplicate those operations with ease.
- Size the growth opportunity within your area. Is there still space for you to own the city in which you are? Why not just focus on that? Remember the value of focus.
If you would like to learn more about how the American Franchise Academy can help you succeed as a multi-unit franchisee, please visit us at AmericanFranchiseAcademy.com . To speak with admissions you can schedule a call here: Admissions
- After reviewing the pros and cons, do you think this multi-unit multi-brand model meets your goals and interest?
- Can you multitask or do you have difficulty focusing on many things at the same time?
- Do you have the team and infrastructure to support multiple-brands?
- How would you compensate for the other limitations of this model?
- Is your current area fully covered or there’s more space to grow