4 Advantages and Disadvantages of Multi-unit Franchises
Business models have their advantages and disadvantages, and multi-unit franchises are no exception. Here are a few pointers on the advantages and disadvantages of owning multi-unit franchises.
Advantages of Multi-unit Franchise Business
1. Business Leverage
If
your current franchise business is working well and you need to expand, then
you can negotiate with your parent franchise not to permit any other
franchisees in that particular location.
This
way, successful franchisors can use their leverage with the parent brand to
build formidable entry barriers.
2. Improved Stability
Since
you are not entirely dependent on any one franchise outlet, unforeseen revenue
vagaries at one outlet can be balanced with others.
In
addition, you can negotiate volume deals with your franchisor, including
reduced fees and royalty, and longer credit windows.
3. Bulk Sourcing & Shared
Marketing
With
multiple franchises under your belt, you can negotiate bulk pricing for goods,
equipment, and services.
Marketing
expenses are also likely to go down significantly, when shared across multiple
outlets.
4. Streamlined processes
Franchises will need robust business processes, in order to operate seamlessly across multiple locations. In turn, process adherence will help you run the business cost-effectively.
Disadvantages of Multi-unit Franchise Business
1. Needs Experience
Unlike
single-unit franchising, multi-unit franchising requires commitment, skillsets,
time, and above all, experience. You need to learn the trick of the trades
first before venturing into this space.
2. Involves Higher Risk
Business
expansion involves a lot of risks and multi-unit franchising is no different. Even
if you are buying the same franchise outlet, you will still have to make additional
investments, which increases your risk.
3. Complexity of Multi-unit
Franchise Operations
Multi-unit
franchises can prove to be complex, given the supply chains, talent
acquisition, and financial planning involved. Owning a multi-unit franchise
business demands additional time, energy, strategic vision, management skills, and
business apps like CRM.
4. Profits Take Time
Successful
multi-unit franchising can potentially earn you more profits but it usually
takes time to get there. The longer the time to reach break-even, the higher
the risk.
For
more insights into the advantages and disadvantages of the multi-unit franchise
franchising and to know how FranchiseNow can help you, Contact Us.