Multi-Unit Franchisee Magazine Special Edition | Page 14

2016

MULTI-UNIT

Brand Diversity

The growing allure of operating several concepts

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ranchising continues to grow—not
only in size, but in complexity—
and in recent years, a huge part of
that growth is attributable to multibrand 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 investors 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 in-

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creasing 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
penetrate new markets; capitalize on certain market efficiencies; reduce the training, opening, and operational assistance
typically provided to single-unit franchisees; and is a means to attract and reward
productive franchisees.”
One dynamic propelling multibrand growth is the combination of
1) expansion-minded
franchisors seeking

multi-unit operators successful with other
brands with 2) successful multi-unit franchisees evaluating new concepts to diversify their organization. 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 organizations they already know, saving countless hours of relationship-building, recruiting, investigation of finances,
etc. For franchisees, adding a new brand
from their current franchisor does the
same. It means working with a known,
trusted management 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 partners 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 wellknown 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 multiunit franchisees to seek out additional brands:

MULTI-UNIT BUYER’S GUIDE 2016

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