MULTI-UNIT FRANCHISES: ARE THEY A GOOD INVESTMENT?
Entrepreneurs looking into franchise opportunities will likely come across multi-unit franchises, or franchise concepts that allow a franchisee to sign an agreement to open multiple locations.
Those who are new to franchising may wonder whether it’s best to start with one or multiple locations. Owning more than one territory can put business owners on the fast track to financial success, but entrepreneurs should consider the following information about multi-unit deals to determine whether they’re the right fit for this type of agreement.
What is multi-unit franchising?
When a franchisor simultaneously awards two or more locations or territories to a franchisee, both parties sign a multi-unit franchise agreement with the understanding that the new business owner will open one or more locations in designated territories, typically within a certain period of time.
The alternative to a multi-unit deal is a single-unit franchise agreement, where the new franchisee agrees to start with one location. The owner can decide to open additional locations later and sign new franchise agreements when they are ready to expand, but there’s no guarantee in the meantime that the desirable locations or territories won’t be sold to another owner.
Should I Stick to One Franchise Concept or Diversify?
There’s nothing stopping an entrepreneur from signing agreements for multi-unit franchises with different brands. Someone may choose to own three family entertainment centers, three fast-casual restaurants, and three spas. However, there are advantages to sticking with one franchise concept.
The proven playbook for success is the primary benefit of franchising, but the playbook for each brand or concept is different, and there’s much to learn about each business.
By sticking to one concept, multi-unit franchise owners can become experts on the process of opening and successfully running the business. It’s worth considering the time saved not having to learn new systems and software for multiple franchise concepts. Becoming a master of one concept allows franchisees to expand quickly with fewer learning curves.
Should I Open Franchises in One State or Several?
Multi-unit owners can either operate their locations in the same region or state, or they can open units across the map depending on their personal business goals, the concept they’re considering, and their comfort owning a business that is physically distant from where they live.
Many owners find they can decrease costs by opening several locations in one region, because they can share resources. Employees across multiple locations can be trained in joint sessions. If staffing is low in one location, employees from another location can step in to lend a hand. Inventory can be ordered in greater quantities, which allows the owner to take advantage of economies of scale. Rather than paying for local marketing in multiple states, marketing efforts in one region can benefit multiple locations.
Concentrating all locations in one region has the added benefit of eliminating competition from franchisees within the same franchise system. A multi-unit franchise won’t worry about competing with fellow owners 20 miles to the north and south if he secures the rights to all three locations.
Multi-Unit Franchises Provide Flexible Opportunity to Build Wealth
With multiple locations come multiple revenue streams, which increases profit potential. Franchise candidates should review a concept’s Franchise Disclosure Document (FDD) with a franchise expert or attorney to more fully understand the brand’s franchise offering. Many FDDs include an Item 19, which details information about gross sales, costs, and profit margins reported by franchisees who were in operation for the previous calendar year.
Keep in mind many franchisors offer a discounted franchise fee per unit for multi-unit owners because multi-unit agreements help the franchisor reach their growth goals faster and are good for their bottom line.
Why Launch Entertainment is a Great Multi-Unit Franchise
Launch Entertainment has pioneered a different kind of family entertainment experience with a wide variety of attractions and amenities for all ages including XP Arena, ninja course, laser tag, bowling, trampolines, Krave Restaurant & Bar Hops beverage service, and more.
The family entertainment center franchise is a service-based, high-margin business model offering single and multi-unit franchise opportunities. Our family entertainment centers provide customers with thrilling, unmatched experiences that draw repeat business. Marketing programs that drive revenue and systems for managing employees help multi-unit owners optimize the business opportunity and maximize returns without being present for day-to-day operations.
Through every step of the process, from site selection and buildout to grand openings and beyond, owners are backed by an experienced franchise team that’s dedicated to helping our franchisees succeed.
Contact the team at Launch today to learn more about our franchising opportunities.