The Challenges and Opportunities of Multi-Brand Franchising

30/04/2018 15:00 | Start a business

Challenges of multi-brand franchising

Owning a franchise can be tough but get it right and becoming a franchisee can be a rewarding and lucrative career choice. When you’ve successfully managed one franchise unit, you may start to consider the possibility of running several profitable franchises. One way to achieve this is to become a multi-unit franchisee. However, you may also want to give some thought to the increasingly popular multi-brand franchising.

Part of the reason why more franchisees are investing in multiple brands is the diversification it offers their franchise portfolio. In times of economic uncertainty, operating franchise brands from a range of different industries can provide balance and stability if one franchise is impacted more than the rest by the state of the economy.

But as with any business, there are pros and cons. You should research what's involved with owning a franchise across multiple industries or sectors before you invest. Let’s start with the disadvantages associated with both multi-unit and multi-brand franchising strategies.

Challenges of multi-brand franchising

Here are some of the challenges that you may have to overcome if you choose to become a multi-brand franchisee:

• It requires large financial investment

The costs of purchasing multiple franchise units are inevitably going to place more financial pressure on you. You’re likely to need to take on more debt to fund your growth and as the amount of money you invest increases so does the possibility of losing it all. Remember, expansion might be rewarding, but it isn’t always easy or without risk.

• There’s a danger that you'll stretch yourself too thinly.

As well as stretching your finances, you may find that your time and attention are also spread thinly when you expand your franchise portfolio. There’s a risk that the quality of service can suffer, so you need to be mindful that you have the resources in place to ensure that this doesn't occur.

• More operational complications

With more locations, come significantly more operational issues to control and manage. Managing multi-brand operations can be a huge challenge so before you invest in multiple franchise brands make sure that you have a robust infrastructure in place to help you grow, scale, and effectively manage operations.

As well as there being disadvantages for franchisees, multi-brand franchising can also make things tough for prospective franchisees too. For inexperienced entrepreneurs, the chance of owning a franchise becomes reduced if the trend for multi-unit and multi-brand franchising continues. Even if a potential franchisee has the right skill set, a franchisor is more likely to offer a franchise opportunity to an existing franchisee as they have proven that they can operate profitable franchises and need less training.

Advantages of multi-brand franchising

There are no promises that running profitable franchises across several industries will be easy but there are many benefits to owning and operating multiple franchise brands:

• You can take advantage of existing infrastructure

The infrastructure that you have developed for one franchise can be utilised for other franchises too. The staff you have employed and trained for back-office tasks such as accounts and HR don't have to be replicated so you can grow your franchise portfolio without having to expand your support team.

• Greater ability to weather economic storms

Economic uncertainty is almost guaranteed when you’ve invested in long-term franchise opportunities. By operating different brands in several markets, you can effectively ride the ups and downs of a turbulent economy.

• Can give you back your spark

When you’ve been successfully operating single franchises for some time, the buzz and excitement that being a franchisee once gave you can be lost. Taking on additional franchises with different brands can provide a new challenge and one that reignites your passion for franchising.

• You can benefit from your experience.

Learning the rules and expectations that come with being a franchisee can take some getting used to. But by the time you’re investing in your second franchise you already have an understanding of the franchise model and have the skills and know-how to make a success of subsequent franchises.

• More profit

The risk of multi-brand franchising may be greater but so is the reward. Of course, you'll encounter challenges that are unique to operating multiple franchise brands, but if done correctly it can be very financially rewarding. In the majority of cases, growth equals profit.

• Greater freedom and flexibility

The benefits of multi-brand franchising aren’t just financial. You’ll also be set to gain from a personal perspective too. As you expand your franchise portfolio, you'll build sufficient staff and resources for them to operate successfully. This means that you can afford to take a step back from the day to day operations of your franchises giving you more time to develop and grow your business or take time out to spend with your loved ones. This is hugely different to a single-unit franchisee who finds it difficult to take leave of their business due to the crucial role that they play in the running of the franchise.

And the benefits don’t end there. Franchisors also gain from having fewer franchisees to manage. Not only this but as these franchisees have already proven to be successful operators who understand franchising, they are less dependent on the needs of the franchisor too.

There are several ways franchisees can build and expand their empire. Whether you choose to invest in multi-units or multi-brands, the general rule of thumb is the greater the number of franchises, the higher the profit. To mitigate the risks associated with growth, do your due diligence, speak to existing franchisees, and only sign on the dotted line if it feels right. It’s safe to say though if you’re considering growing your franchise by purchasing units with multiple brands, you’re probably more than ready to make the move.

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