Multi-Unit Franchisee Magazine Special Edition | Page 13

BRAND DIVERSITY
THE GROWING ALLURE OF OPERATING SEVERAL CONCEPTS
Franchising continues to grow—not only in
size, but in complexity—and in recent years,
a huge part of that growth is attributable to
multi-brand franchising.
Makes sense. If following the system
works for one successful brand, it
will most likely work in another, then
another—if you choose wisely. And if your
unit economics are strong, more profit
will flow your way with each passing year
and additional brand.
Diversification, a recommended strategy
in designing an investment portfolio, is a
big part of the thinking behind the growth
in multi-brand franchising. As savvy inves-
tors know, no matter how good your ROI
may be from a single holding, it’s not wise
to put all your eggs in one basket. And as
multi-unit franchisees seek new avenues
for growth, an increasing number are
adding second, third, and fourth brands
to their portfolios.
“There is a definite interest in growth
through multi-concept operations,” says
Darrell Johnson, president of FRANdata.
“It’s continuing to expand and grow, and
we see the trend continuing upward.”
Franchise attorney Lane Fisher observes:
“From a franchisor’s perspective, multi-
unit franchising provides opportunities for
accelerated growth; a vehicle to pene-
trate new markets; capitalize on certain
market efficiencies; reduce the training,
opening, and operational assistance
typically provided to single-unit franchi-
sees; and is a means to attract and reward
productive franchisees.”
One dynamic propelling multi-brand
growth is the combination of 1) expan-
sion-minded franchisors seeking multi-unit
operators successful with other brands with
2) successful multi-unit franchisees evaluat-
ing new concepts to diversify their organi-
zation. This alignment of interests has been
accompanied by a rise in the number of
franchisors offering several concepts from
under one corporate umbrella—usually
limited to a single industry segment (fast
food or home repair services, for example).
For franchisors offering multiple brands, it
means working with franchisee organiza-
tions they already know, saving countless
hours of relationship-building, recruiting,
investigation of finances, etc. For
Multi-Unit Buyer’s Guide
franchisees, adding a new brand from their
current franchisor does the same. It means
working with a known, trusted manage-
ment team, saves time, helps them open
units sooner, and also can mean discounts
on franchise fees, sometimes even royalties
for a limited time.
Franchisors seeking new multi-unit part-
ners are looking for a proven track record
managing multiple units, relevant industry
experience, positive cash flow, strong unit
economics, and a solid management team
and infrastructure. And, of course, signing
multi-unit or area development deals also
means dealing with fewer franchisees to
sell more units. Franchisees seeking a new
franchisor partner look for pretty much
the same: a solid management team,
strong unit economics, a well-known and
respected brand name, and an opportunity
to develop a territory over the long term.
Taken alone or together, there are many
reasons that inspire successful multi-unit
franchisees to seek out additional brands:
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