Although according to the most recent figures contained in the British Franchise Association Journal growth of multi-unit ownership structure has stabilised[1]by dropping to 35% in 2024 from 36% in 2018, multi-unit ownership remains a strategy for both franchisors and franchisees. What 2024 figures show is that despite the number of multi-unit franchisees remaining about the same, the number of units per multi-unit franchisee has significantly increased[2]. So whether you are a franchisor or a franchisee what should you consider before embracing expansion via multi-unit?
Let’s start with the Franchisor’s point of view. For any franchisor, there are some clear advantages in a multi-unit strategy:
Keep the same number of units but have less individuals to deal with. Communication is often a challenge, even for experienced franchisors, especially as the network grows, and therefore keeping the number of individual franchise owners lower, can help with communication.
“Better the devil you know than the devil you don’t” – by using existing franchise owners you are dealing with individuals whom you know and who already have a proven track record not just generally but specifically with you.
Profitability & Engagement – multi-unit franchisees will undoubtedly be looking to benefit from their own economies of scale and, theoretically, are more likely to be more profitable. They are also more likely to engage with the franchisor in testing new initiatives and/or to help out with emergencies or taking over units which may be underperforming.
The obvious risk with the multi-unit strategy is that if a multi-unit franchisee does not perform or if the relationship between the franchisor and the franchisee breaks down, that might affect multiple locations. So what can a franchisor do?
First and foremost, as with all franchisees, this comes down to a good selection process. Have a clear criteria of what you are looking for in your multi-unit franchisee. A good single unit operator may not necessarily make a good multi-unit operator. Get clear on your criteria and do not compromise on it.
Consider your systems and infrastructure – what would you need to tweak to enable multi-unit franchisees take advantage of their economies of scale? Multi-unit franchisees are likely to have a leadership team and certainly roles within their business who will be working across multiple sites. Are your systems flexible enough to cater for that? Do you need to prepare new template contracts for use by your multi-unit franchisees? Think also about the head office team – multi-unit franchisees may need to be supported differently. They will be looking, perhaps more than others, for you to upskill their teams etc – consider what support you need to have in place to better support your multi-units!
Growth, resales and exits – don’t just think about here and now but consider the future. What might an exit look like for a multi-unit franchisee? Sometimes, thinking about the future might affect the requirements for how multi-units are set up in the first place – it is much easier to set something up right in the first place rather than having to separate it in the future!
If you are a franchisee thinking about growth and expansion via multi-unit, consider:
You and your team – more than ever you will need to be working “on” the business rather than “in” the business – is that something you can do? What support do you need to have around you in order to enable you to move to the next level? Do you have the right team in place and how will you develop them?
Funding – do you have sufficient resources both short term and long term?
Strategy – what does your strategy look like? What does your exit look like? Have you allowed for the unexpected? Is your business continuity plan sufficiently robust and regularly tested?
If you haven’t already done so, speak to those who are already multi-unit owners both within and outside of your own network. What were their challenges and how did they overcome them?
Last but not least, reflect on your relationship with the franchisor. If multi-unit expansion is your strategy then having a healthy relationship with your franchisor is more important than ever. Giving and receiving open and constructive feedback, having, what sometimes may be, difficult conversations and working together with the franchisor will be essential. After all great success stories in franchising are made from great franchisors and great franchisees working together as a team!
[1] British Franchise Association Journal 2024, p.32
[2] British Franchise Association Journal 2024, p.32
