While driving down the road, have you noticed there are more of the same franchises popping up in surrounding areas? Perhaps you’ve seen three Dunkin Donuts within a 10 mile radius. These are likely to be owned by a multi-unit franchisee.
What is Multi-Unit Franchise Ownership?
A multi-unit franchise involves a franchise agreement which provides a franchisee with the rights to develop more than a single unit. Multi-unit franchisees are people who can buy a territory with several units and build them over a relatively short period of time, say, six months to a year.
Why People Become Multi-Unit Franchisees
Just like retail stores attract customers with a BOGO (buy one get one free) offer or a discounted sale price, franchisors offer reduced rates per unit when buying more than one.
For example, when you sign a multi-unit agreement with Marco’s Pizza, you’ll pay a discounted franchise fee for each unit you commit to opening after your first one. Marco’s Pizza charges a franchise fee of $24,000 for 1-4 units and drops the price to $23,00 for 5-8 units.
Some franchisors, especially in the food service industry, found the way to succeed in the competitive restaurant space was to rely on multi-unit franchisees. Therefore, today, many successful franchises award contracts to multi-unit franchisees only and are steering away from selling single unit deals.
As a multi-unit franchise owner you can:
- See a much greater financial gain in the long run
- Have increased negotiating power with real estate developers
- Receive preferred pricing on supplies, products and marketing services
- Realize cost savings on labor because you can house human resources and accounting departments under one roof
“I chose Marco’s because of the product. I did a lot of research when I wanted to get into the pizza business”, says Glenn Ajmo, Marco’s Pizza multi-unit owner in FL. “With Marco’s there’s a lot of availability, there’s a lot of growth potential and there are still a lot of exclusive areas.”
Related Article: What Makes a Great Franchise?
From the franchisor’s perspective, the benefits of offering multi-unit franchises are:
- It develops the brand quicker – this is especially important when introducing a new concept or theme to be the first to appear “on the scene”
- The franchisees are more sophisticated and often have existing relationships with vendors and real estate professionals
- A smaller group of owners to train and manage – efficiency is key – it is easier to train 1 experienced person than a dozen with different levels of experience
- Access to capital, infrastructure and human resources
Facts and Stats
According to FranData, multi-unit franchisees currently own 53% of the 450,000 franchise units in the U.S. Multi-unit owners now control 76% of franchised restaurants.
Multi-Unit Franchising in a Flash
Want to view some interesting tidbits about multi-unit franchise ownership? See below for a useful Franchise Solutions’ infographic and get a quick snap shot of the sector including trends, statistics and a comparison of multi-unit and single unit ownership.