Franchising 101: The Pros and Cons of Multi-Brand Franchising

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Challenges of multi-brand franchising

If you’re an ambitious franchise owner that’s considering growing through multi-brand franchising, read on to discover its pros and cons, and whether it’s the right business move for you.

Let’s imagine you’re already the owner of your first successful franchise – you might be looking for new avenues of growth. Multi-unit franchising is on the up, with around a third of franchisees owning and running multiple units (up seven percent since 2015). But as well as this growth strategy, multi-brand franchising is becoming increasingly popular in the franchise industry. While it tends to be most common with restaurant franchises, real estate, hospitality and business coaching industries are starting to dominate the space too.

Leading multi-brand franchising in the UK is international franchisor Franchise Brands plc, which has four principal brands and a combined network of 450 franchisees in 12 countries. But, before you take the next steps towards building your own franchise empire, it’s important to understand whether it’s the best business decision for you. To help you out, we’ve complied the main pros and cons of multi-brand franchising into one handy article.

‘Multi-Brand restaurant franchising has exploded in recent years. Countless franchisees now operate two, three or more non-competing restaurant brands… These franchisees are driven by revenue growth, brand diversification, open territory, capitalising on existing human resources, local real estate, consumer trends and demographics in a market.’

Let’s now explore some more of its pros in detail:

1. 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.

2. It’s easier to weather economic storms

According to a franchise expert, ‘investment diversification is a big reason why franchisees might consider broadening their portfolio of brands.’

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 more easily.

3. You can get your spark back

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

4. You have previous experience to draw on

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.

5. You can make even 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.

6. There is greater freedom and flexibility

You’ll also be set to gain from a personal, as well as financial, 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.

The cons of multi-brand franchising

While there are many pros to running a multi-brand franchise operation, there are some challenges that you may have to overcome. These include:

1. 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.

2. 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.

3. 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.

Make your mark with multi-brand franchising

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.

If you’re still not sure about owning multiple brands and would rather stick with one franchise operation, you can read more about multi-unit franchises here.

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