Multi-Unit Franchisee Magazine Special Edition | Page 12

SPREADING THE RISK
MULTI-BRAND FRANCHISING ALLOWS MULTI-UNIT OPERATORS
TO BALANCE RISK AND RIDE OUT THE UNCERTAINTIES
OF THE MARKETPLACE IN MANY WAYS:
ECONOMIC CYCLES. CASH FLOW. SURPRISES.
Operating brands in different industries
can help minimize the ups and downs of
an uncertain economy. Casual dining as a
segment took a huge hit in the recession,
while bargain-priced fast food continued
to do fairly well; new car dealers suffered
while automotive maintenance and repair
businesses held their own and expanded. A franchisee with several units of a
casual restaurant brand ventured into
rental stores. Stocking a new rental
store with merchandise is expensive,
and monthly rental fees don’t cover the
purchase price for 6, 12, or 18 months,
tying up valuable cash in inventory. The
daily cash flow from the restaurants was
the perfect complement to keep the
organization healthy until the rental stores
started showing a profit—which they did
handsomely in time. Fast food operators have been hit hard
over the years by news of salmonella,
E. coli, employee misbehavior, and
other developments beyond their
control. Having other brands in your
portfolio can help you stay afloat until
a negative situation is remedied and
trustin the brand restored.
SEASONAL CYCLES.
A lawn care franchise in a four-season
climate slows to a crawl in the winter. Ice
cream, lemonade, and frozen desserts
peak in the warm weather, so why not
add soup and sandwiches as the weather
cools? Adding a second business to
balance out the seasons will keep
employees engaged and the cash flowing
in. New brands can be in related sectors
(maid service, electrical, plumbing, home
insulation), or in completely different areas
(food, rental centers).
10
DAY PARTS.
Breakfast, lunch, dinner, late night, and
in-between. Whether it’s food or services,
consumers and businesses have needs 24
hours a day. If your business makes the
majority of its sales at breakfast and lunch,
adding a brand that peaks in the afternoon
and evening will make for a longer day, but
also a stronger bottom line.
2017 Annual Edition