Multi-Unit Franchisee Magazine Issue III, 2013 | Page 82

FranchiseMarketUpdate
By Darrell Johnson

MUOs on the Rise

of multi-unit franchisees are in the South,
including: Arkansas, Mississippi, Kentucky,
and Alabama, each with 62%.

It’s a good time to be a multi-unit operator!

Additional findings

M

ulti-unit franchise operators are about to exceed
the 55-mph speed limit: we
can now officially say that
they control 55% of all franchised units in
the U.S. The 80/20 rule also applies: those
55% of all franchised units in the U.S. are
controlled by 20% of all franchise unit
operators. Both are records.
The steady expansion of multi-unit
dominance started in the late 1980s, so
it is relatively recent in the context of the
franchise business model. As recently as
eight years ago, a majority of units were
controlled by single-unit operators. The
pace of change has been consistent and
rather predictable, with a current rate of
change of about 1% each year.
There are two big drivers of this change.
The first is that we raised a generation of
franchisees with growth on their minds.
They pushed through the older “buy a
job” mentality with business plans aimed
at multi-unit expansion from the time they
started in business. The second driver is
cooperative franchisors, who went from
being concerned by too much franchisee
power to actively designing development
programs around multi-unit models.
Some of today’s largest franchisees are
NPC International (1,158 units, mostly
Pizza Hut); Target Corp. (1,147 units, mostly
Pizza Hut Express); Heartland Automotive
Service (529 units, mostly Jiffy Lube); and
Harman Management Corp. (466 units,
mostly QSR brands).
As with these four franchisees,
industries with the highest concentrations of multi-unit franchisees are
in food. As the table shows, more
than 82% of franchised QSR businesses are controlled by multi-unit
franchisees, followed by restaurants
(sit-down) at 77% and baked goods
at 72%. Also of note is the rise of
some non-food industry classifications, such as business-related, automotive, real estate, clothing retail,

80

Multi-Unit Franchisee Is s ue III, 2013

Top 10 Industries by
MUF Control

% Multiple
Units

QSR

82.4%

Restaurants (sit-down)

77.1%

Baked goods

72.1%

Beauty-related

66.4%

Frozen desserts

65.6%

Business-related

58.0%

Automotive

57.9%

Retail food

57.1%

Real estate

40.8%

Clothing & accessories

38.3%

Education-related

37.8%

and education-related.
On the other end of the spectrum, less
than 5% of franchised travel businesses are
controlled by multi-unit franchisees, followed by computer products and services
(5.7%) and photographic products and
services (8.5%). Perhaps the most important point is that multi-unit franchising
has penetrated all industries where the
franchise business model is found.
There are some interesting geographic
distinctions as well, creating a sort of NorthSouth divide. Only four states have a majority
of units in the hands of single-unit franchisees: Maryland (51%), Vermont (52%),
New Jersey (56%), and Montana (57%).
West Virginia, at 64%, has the highest concentration of units controlled by
multi-unit franchisees. All other states with
high concentrations of units in the hands

Here are some more statistics that shed
light on the profile of multi-unit operators.
• Based on a large sampling of franchised
businesses for which gender info