MULTI-UNIT
NEED TO
KNOW
Buyer’s Guide
Multi-Mania
F
ranchisees are an optimistic lot,
expansion-minded, on the grow,
always alert to new opportunities.
And for them, multi-unit franchising represents one of today’s most attractive opportunities. Whether it involves increasing
the number of units of their current brand
or adding new brands to their holdings, the
allure of multi-unit franchising is attracting the best and brightest franchisees in
the business with increasing frequency.
During the past 20 years, what began
as a trickle has become one of the hottest
vehicles for building a business rapidly and
sustaining it through the years. FRANdata
puts the number of multi-unit operators at
more than 34,000, and they control more
than 155,000 franchised units in the U.S.
Successful multi-unit operators are a
different breed than the single-unit franchisees they are displacing. Light years beyond
the old “buying a job” mentality, they are
skilled, professional business executives who
have chosen franchising as their business
model. They possess the skills, training,
capital, infrastructure, and vision to keep
adding units to their portfolio—without
stressing their organization or their stomach.
Even during the recent economic
upheaval, savvy multi-unit franchisees
continued to expand, especially in QSR and
in services such as senior care, hair salons,
massage, home maintenance, children’s
activities, pet care, and more. After all, if
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MULTI-UNIT BUYER’S GUIDE 2012
MORE FRANCHISEES than
ever are ADDING NEW UNITS
you can make money with one unit you
can make even more with two, three, or
more, right?
Well, yes—but it takes a certain skill
set, dedication, and infrastructure to make it
all work effectively and efficiently. If you’re
a regular reader of Multi-Unit Franchisee
magazine, especially our ongoing profiles
of successful multi-unit franchisees, you
know exactly what we mean.
All the right pieces must be in all
the right places for a multi-unit franchise
organization to succeed. If they’re not,
the results can be disastrous for both
franchisee and franchisor. At its best,
however, multi-unit franchising allows
franchisees (and franchisors) to increase
their unit count, market penetration, and
profitability more rapidly than a singleunit owner ever could.
Multi-unit franchising already has
altered the landscape of franchising in many
ways, and will continue to do so. In recent
years, private equity has “discovered” the
profit potential of multi-unit franchising,
buying into multi-unit franchise organizations or acquiring them outright—even
doing the same with franchisors. And
you know they appreciate the benefits and
value of a diversified portfolio!
According to franchise attorney Lane
Fisher, “The emergence and growth of
multi-unit franchisees is having a profound
effect on franchising. It is rapidly changing
prospective franchisee screening standards,
the quality and substance of existing training and operational support, pressuring
franchisors to make financial performance
representations in their franchise disclosure
documents, and affecting the way contracts
are written by redefining ‘non-negotiable’
rights and deal breakers.”
Fisher says that although multi-unit
franchising is clearly a growing trend, particularly in food, it is not appropriate for all
opportunities. “Sometimes it is a function
of timing, as many new franchisors use
various forms of multi-unit franchising to
grow in early stages; or in other cases the
unit economics simply will not support
the additional layers of infrastructure to
make the investment worthwhile; and in
other cases multi-unit expansion is at odds
with corporate philosophy, or the lack of
expansion capital in a particular industry.”
In other words, while multi-unit