Pros & Cons of Becoming a Multi-Unit FranchiseeAug 30, 2022
There is a big hype these days about multi-unit franchising not only among investors but also brands that want to grow with this model. It has gotten so much attention that there’s even an annual event, the Multi-Unit Franchising Conference, solely focused on guiding these types of franchisees to help them grow their multi-unit operations.
If so many are taking this path, how much of a good idea is it to become a multi-unit franchisee? The answer depends on what are your business goals and what you want to achieve for your life and your future.
To help you decide whether multi-unit franchising is for you, let’s review some pros and cons of multi-unit franchising.
CON: You’ll have more work
PRO: Your job will be more interesting work
When you become a franchisee, it is all exciting. You have a new brand and new equipment, and the franchisor and business consultants are supporting you as you start operations. Your entrepreneurial adventure is very fun and fantastic but pretty soon you find yourself running operations alone, day in and day out, to make things happen.
But, when you become a multi-unit franchisee, eventually the work that you do will no longer be within those four walls, and therefore, it becomes a little bit more interesting work.
CON: You lose control of what happens in your unit
PRO: You are able to delegate operations
When you only have one unit and spend your day inside those four walls, you know exactly what happens with everybody at all times. But, when you have two or three, four, ten, 15, or 20 units or so, you eventually lose control of all the small details in the stores, because there is no way that you can manage that.
However, as you're growing, you’ll eventually be able to delegate operations to capable, trained people. That’ll allow you to focus on the things that are more strategic and maybe more fun for you.
CON: You need to develop new skills
PRO: You get to learn new abilities
Another negative thing about operating multiple units is that what got you through franchising won't be enough to get you through the multi-unit model. That means that you require new skills as you grow from one to 2 units, from 2 to 5, from 5 to 10 units, and so on.
Multi-unit franchising requires new knowledge and information about who you are as a leader. On the bright side, you’ll be able to learn and develop new skills which will also help you grow as a professional.
One of the things that my friend Brent Veach, a 55-unit Del Taco franchisee told me in a past interview (you can view it here) is that, as he was growing as a multi-unit franchisee, he didn’t realize how much more needed to develop himself as a businessman, a leader, and a financial investor to make the right decisions for his company. Once he became aware of this, it became a challenge for him.
Note: if you don’t like to learn new things, maybe this is not such a good path for you.
CON: Bigger team means more challenges
PRO: Your impact increases
Operating more units will mean employing more people. And with a bigger team comes more challenges and more drama. If you don't like dealing with this, multi-unit franchising is probably not a good thing for you.
However, if you are okay with handling whatever comes with growing your staff, that also means that you're going to have a more significant impact on the world. You can employ more people and help change their lives, and if you embrace that experience and opportunity, it could be very rewarding.
Yes, the challenges, the drama, and the problems will all be there. But you eventually will leave a legacy in each one of those people if you commit to making a difference in their lives by caring for them and helping them grow.
CON: The risk is greater with more units
PRO: You can diversify your risk
As a multi-unit franchisee, you indeed increase the risk. But, if you only have one unit, you're putting all the eggs in one basket, as the saying goes. If it’s a good unit and you're managing it well enough, then it's okay. Otherwise, your chances of failure are very high.
On the other hand, as you are opening more units, you are also diversifying your risk because you'll eventually have many stores that do well and some that don’t. But, by diversifying, the good ones will overcome the negative ones.
You’ll also be able to either divest, relocate or close the units that are not doing so well so you can better manage your portfolio and minimize your risk as you continue to grow.
CON: You require more investment
PRO: The business can fund your growth
Of course, you’ll need more capital, even loans, to open more units. But if you manage them well and acquire the knowledge you need to make those units profitable, the business itself will fund your growth so you can add more units to the corporation. That’s one of those new financial skills you need to learn.
Another reality is that if you are a successful franchisee, you increase your access to capital because you’ll become a lower risk for banks.
If you want to grow your profits exponentially and achieve time and financial freedom, the only way to do that is through multi-unit franchising. But the decision ultimately goes down to what are your business goals, aspirations, and desires, and the acceptance and willingness you have towards risk. That’ll help determine if becoming a multi-unit franchisee is right for you.
I hope this clarifies the benefits and difficulties of the multi-unit model. If you get into it, you should acquire the necessary knowledge and skills to help you do it successfully and sustainably in the long term.
That is where The American Franchise Academy enters. We can help you achieve those dreams by providing tools to allow you to run and grow your franchise easier and with a lot more profit.
Subscribe to our YouTube channel and give us a thumbs up on Facebook, Instagram, and LinkedIn to learn more about our services and get more resources like these to help you thrive with your franchise business.
- Are you comfortable delegating operations, or do you rather maintain control of all the details?
- Are you willing to cope with the challenges of having a bigger team?
- Do you have a learning mindset and an eagerness to discover new things?
- How risk averse are you?
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