2016
MULTI-UNIT
What ’ s Driving Multi-Unit Growth Stats point to continuing multi-unit expansion
For the past few years you have heard me note that the majority of franchised units in the U . S . are owned by multi-unit operators . With more than 400,000 franchised units in the country , multi-unit operators control about 53 percent of those units . That ’ s impressive , and the percentage controlled by multiunit operators is rising . This growth is a consequence of many brands focusing their development models on multiunit development packages over singleunit programs .
Today , FRANdata ’ s database shows the following breakdown of multi-unit operators ( MUOs ):
These are the “ known ” franchisees in our database . While we try to keep up with the changes in each franchise system , our database does not include current data for all of today ’ s 3,500-plus brands . Therefore , each category understates the actual total . Since our database is more current with the larger brands and most of the smaller to medium-sized brands , any under-counting is primarily with the lessestablished brands , which are less likely to have many multi-unit operators .
Statistically , we think we have more than 90 percent in each category . Using this 90 percent confidence level leads us to good representative estimated counts . Thus , in total , we believe there are more than 40,000 multi-unit operators in the U . S . With the number of units they control and the brands and sectors they operate in , that puts the combined annual revenue of multi-unit operators at more than $ 100 billion . There ’ s some serious operational , business , and political influence in that figure .
We know the number of units they control is growing . But how is the number of multi-unit operators changing ? For
that , we can turn to our actual database counts . Assuming the actual-to-estimated changes are consistent , the actual counts should reflect about the same percentage change per category that our estimated numbers would show .
In a three-year span , we ’ ve seen a 17 percent increase in entry-level multiunit operators . That ’ s certainly consistent with our analysis of the development models franchise brands have been using over the past few years . To wit , entrylevel multi-unit operators ’ average annual growth of nearly 6 percent slightly exceeds the growth of franchised units generally , which has been expanding by about 5 percent per year .
Much more interesting is the expansion of the larger categories of multi-unit operators . In the three-year span , those categories expanded about 25 percent . Even more interesting is the consistency with which each category expanded , ranging between 24 and 28 percent .
Several obvious trends are affecting these outcomes . Multi-unit development models became a common form for expansion only in the past 20 years . In a life cycle sense , the data confirm that this model is still solidly in a growth mode . And although many franchisors have had to cancel contracts for development , especially for the second and third units within the contract timelines , these data suggest that many second , third , and fourth units have been added in recent years .
We also can ’ t ignore the impact that one of the “ big two ” small-business challenges — capital access — may have had on the growth statistics of multi-unit operators ( the other , of course , is unit sales in a soft economy ). Most banks have tightened their underwriting borrower qualification standards to include existing experience in the industry . This undoubtedly has led to more multi-unit operators compared with new single-unit operators .
Finally , it should be noted that the growth of multi-unit operators is happening , in part , from the exiting of some single-unit operators . Transfers are on the rise across many industries . As I ’ ve noted previously , multi-unit operators increasingly are the buyers of existing units . It makes sense , since they are in the best position to evaluate the current operations and future potential of an existing unit .
All of this suggests a continuing rise in influence of the multi-unit operator within franchising . Want further evidence ? Franchise Update Media ’ s Multi-Unit Franchising Conference has set attendance records in the past several years . Looks like I ’ ll be seeing more of you in Las Vegas next year !
Darrell Johnson is president and CEO of FRANdata , an independent research company supplying information and analysis for the franchising sector since 1989 . He can be reached at 703-740-4700 or djohnson @ frandata . com .
8 MULTI-UNIT BUYER ’ S GUIDE 2016
2016
MULTI-UNIT
What’s Driving
Multi-Unit Growth
F
Stats point to continuing multi-unit expansion
or the past few years you have heard
me note that the majority of franchised units in the U.S. are owned
by multi-unit operators. With more
than 400,000 franchised units in the country, multi-unit operators control about 53
percent of those units. That’s impressive,
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