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Improve the Quality of Your Franchise Business with Multi-Unit and Multi-Concept Franchises

Aug 17, 2007
Multi-unit and multi-concept franchising both provide opportunities for fast, efficient growth. Franchising is an obvious consideration for individuals who naturally have that entrepreneurial spirit. You might be wondering what is means to have an entrepreneurial spirit.

Are you self-motivated? Do you dream of building a business with your two hands? Do you struggle as an employee, constantly feeling like you could improve the company if someone would hand over the reins? If one or more of these questions provokes an affirmative answer, you are an entrepreneur who is ready to find a track into the business world, possibly with a business franchise.

Most importantly, you do not need a college degree or years of experience to take advantage of this increasingly emergent business prospect. And, with the right information, you can successfully operate more than one franchise business.

What is Multi-Unit and Multi-Concept franchising?

Multi-unit franchising occurs when a franchisee operates multiple stores from one franchisor within a specific area. This type of franchising is popular, for instance, in the food industry. Entrepreneurs seeking a restaurant franchise will find a bounty of options. Similarly, multi-concept franchising involves more than one brand and works best if the concepts are related. For example, children's hair care and family portrait studios are two concepts related enough to create synergy for each another.

Challenges of Multi-Unit and Multi-Concept franchises

As with any rewarding investment, there are a few challenges to take into account when considering a multi-unit or multi-concept franchise. First and foremost, choosing a good location is vital. Consider the surrounding area of a potential outlet. Going back to the restaurant franchise example, you might ask, are there plenty of retail businesses nearby? Obviously, an eatery would do well if located near a shopping center or strip mall where guests may be inclined to take a food break.

Another challenge common to first-time franchisers is micromanaging. Certainly, you have a vested interest in how each store functions but much of the responsibility should be placed on an infrastructure of managers you hire.

These individuals are responsible for the everyday operations of their stores and should be trusted to run these businesses as you would if you were working there each day. Hire managers to serve as an extension of you. They should believe in the franchise, working toward its success and most importantly, its growth. This is where you meet the first advantage of a multi-unit franchise business. If managers see the potential for growth, they consider themselves as being on a career path. The benefit for you here is that you are much more likely to have a dedicated management team for the long term.

Also, allowing each manager to assume responsibility of store operations allows him/her to put personal touches on that particular location. This gives the store the "feel" of a small business franchise, something most customers appreciate.

Of course, staffing is always problematic, but you can improve it by treating your managers and their staff members well. Again, growth potential encourages employees to stay with your franchise because they see a career path. They are also far less likely to seek employment elsewhere if they feel that their services are valued and their opinions respected. Many multi-unit and multi-concept franchisees meet with their managers regularly. Some even set up voluntary focus groups for subordinate employees to give them a chance to express any concerns.

Advantages of Multi-Unit and Multi-Concept franchise businesses

With the challenges come advantages that make multi-unit and multi-concept franchising worthwhile. One key advantage is that the risk is absorbed by several units or brands. With multiple stores, you do not have all your eggs in one basket, so to speak.

For example, if a local government suddenly plans road construction near one of your stores, sales will inevitably dip. Fortunately, your remaining outlets will not suffer. In fact, some of the business may simply be diverted to one of your other locations. Moreover, with a multi-concept franchise, you can spread the risk over several brands. If you operate a realty franchise, for instance, and the housing market experiences a low, it is unlikely that all stores and all brands will experience down time in the same period.

Furthermore, you will have access to more cash flow. Many multi-unit franchisees, for example, use the cash flow from other units to expand with additional units. And, the financial benefits do not stop there. You also have the option of reducing overhead costs by spreading them over several outlets, also gaining economies of scale.

In short, with multi-unit and multi-concept franchising, more capital becomes available. Meanwhile, franchisees running a single-unit are immersed in the details of managing a small business franchise.

Additionally, multi-unit franchises provide efficiency because of their potential for shared labor. Many employees are willing to take shifts at other locations, if needed; thus, the costs of hiring and training new personnel decrease. You also save money in other areas such as internal warehousing, distribution and advertising costs. If you operate a multi-concept franchise, you are far more likely to acquire special location and lease considerations from landlords. Most landlords prefer to work with multi-concept franchisees because they can subdivide larger areas. Your benefit is that they provide accommodation for all of your brands.

Building an Infrastructure for your franchise

First, consider any skills you may have. As mentioned, the most important attribute of a successful franchisee is an entrepreneurial spirit. However, if you have a degree in accounting, you may want to consider what you have to offer as you plan the infrastructure.

When planning your infrastructure, which should be designed to umbrella all units and brands, it is important to bear in mind how many staff members you will need to launch verses the number you will need to grow.

Starting with a large infrastructure will help the launch go much more smoothly. Otherwise, you may end up with a few people scrambling to meet the demands of a new business franchise.

However, there are significant downfalls to this method. For instance, having too many people in your infrastructure can lead to a breakdown of communication. Also, once all units and brands are up and running, you may find the costs of maintaining a large infrastructure to be too high and cutting back on personnel can reduce morale among remaining employees. Of course, the best way to solve this dilemma is to carefully plan and build the infrastructure slowly.

Choosing the best franchise opportunities

It is important to remember that there are many franchises for sale in today's marketplace. Still, not all franchisors are equipped to support multiple units. This does not necessarily mean the franchisor is unsuccessful. Instead, it may simply mean that there is limited demand for a particular brand in your area. Or, the structure of the store might simply be geared toward a single-unit franchisee. This explains why it is always best to thoroughly research a franchisor before any agreements are made.

If you are considering a multi-concept franchise business, remember to carefully review the franchise agreements. Make sure your definition of a competing business matches that of each of your franchisors.

Most importantly, keep in mind that there are plenty of opportunities at your disposal. It is imperative that you research each prospect before investing your valuable time and money.
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