Multi-unit franchising, for some, can turn out to be a winning proposition. That’s because owning multiple units of the same franchise concept can bring in serious revenue.
For instance, if you own 5 franchise businesses that each bring in $350,000 in annual revenue, you’re running a $1.75 million operation.
And if 10% is going to your bottom line, that means you’re making close to $200,000 annually. That’s not a bad paycheck, considering all the advantages you have as a small business owner.
Why Corporate Executives Like Multi-Unit Franchising
There’s a reason that multi-unit franchise opportunities are attractive to current/former corporate executives; they’re used to winning…used to making a lot of money. And they really don’t want to take a big hit, income-wise if they decide to go the franchising route.
There’s another reason why executive-types like the idea of owning a multi-unit franchise business. It’s that they can witness their growth, first-hand.
Generally speaking, multi-unit franchise contracts specify that franchisees are obligated to open a certain number of stores in a certain amount of time, and in a specific geographical area. In order to reserve that area, and the future units that you’re obligated to open, you’ll pay a either a portion of the upfront franchise fee for each future unit that you’ve agreed to open, or the entire amount. It depends on the franchisor-and the multi-unit franchise contract that’s been written.
For example, the initial franchise fee for a single unit franchise may be $35,000; if you sign a 3-store agreement, the fees for the 2nd and 3rd store may be discounted if you pay them in full, to let’s say $25,000 each. So, when you sign your 3-store agreement, you’ll write a check for only $85,000, total. Sometimes, as i wrote above, the franchisor only requires a partial payment for your future stores; it depends on the franchisor. The bottom line is that you’re reserving a specific geographical area in which you agree to develop a certain number of franchises-and you must open them, or you’re in breach of your contract.
Would You Like To Own Multiple Franchises?
If you qualify, financially, for multi-unit franchise ownership, should you go ahead and pursue this type of business operation?
If you want a business you can grow, and you like the idea of controlling a geographical area, owning multiple franchise units could work.
In addition, you need to be prepared to have employees, including managers. And you’ll need to maintain a fair amount of working capital for things like inventory, advertising, and payroll.
Finally, you’ll need to have patience.
That’s because setting up (and growing) a multi-unit business takes time. It’s one store at a time.
But the rewards…