Multi-brand franchising describes the process of running two or more franchise units within different companies. For example, if you manage a McDonald’s restaurant and a Subway outlet, you’re a multi-brand franchisee. But are there any benefits for franchisors?
Did you know, around 30 percent of franchisees are multi-brand investors? In the food and drinks industry, this figure rises to 50 percent (What Franchise).
The multi-brand approach is a popular one, but before we dive into the advantages of the model, let’s take a closer look at it.
What is multi-brand franchising?
Multi-brand franchising involves owning units across more than one business brand. Investors might run multiple branches of several different companies - all in the name of diversification. At a large scale, companies can own and oversee the operations of entire franchise brands as part of its portfolio.
For instance, the parent company Franchise Brands manages Metro Rod, Metro Plumb, ChipsAway, Ovenclean and Barking Mad. Meanwhile, Neighborly’s portfolio includes Drain Doctor, Dream Doors and Countrywide Grounds Maintenance. And Yum! Brands owns some of the most famous franchises in the world: KFC, Pizza Hut and Taco Bell.
I expect multi-brand franchising to get more common. There’s a limit to growth for any particular franchise brand, so multi-brand franchising offers a new way to grow, whether by developing a new brand or acquisition.
-Mark Abell, Bird & Bird Head of Franchising
Owning and operating several different franchise brands can be extremely complex and requires skilled, well-informed and proficient franchisees. For this reason, multi-brand franchising isn’t for everyone. But for franchisees with the right skills and attributes, it’s often a risk worth taking.
Although multi-brand franchising is currently more prevalent in America and Australia than in the UK, the system is growing in popularity across Great Britain.
Advantages of multi-brand franchising for franchisees
1. Investors can increase their portfolio and profits
If a franchisee feels they’ve reached their potential within their territory, they can achieve further growth with another franchise unit. Joining a different brand provides the option to move into a new geographical market as well as a new industry, which creates fresh and exciting opportunities.
2. Franchisees can make financial savings
Experienced investors can get going far quicker than entrepreneurs who are new to the franchise system. If they invest in another brand within the same industry as their current business(es), they’ll be able to access new possibilities while using the expertise they’ve already developed.
Multi-brand franchisees won’t necessarily need to splash out on training schemes and they’ll be able to use their experience to reduce their outgoings whenever possible.
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3. Investors can weather economic storms
Multi-brand franchisees should benefit from a stable turnover. If one of their brands is performing poorly, they can use the revenue from the other units to balance out their overall profit.
Investors who understand the importance of portfolio diversification can join several brands in different markets to level out turnover during times of economic uncertainty.
4. Investors can operate complementary seasonal businesses
Few brands manage to perform well all year round, whether they’re created as ‘seasonal’ businesses or not. Restaurants, gardening services and pet-sitting companies are often busier during the summer, while Christmas decorating firms and retailers usually see a spike in demand towards the end of the year.
Multi-brand franchisees can avoid lulls in demand by investing in complementary businesses and keep busy throughout the year.
5. It’s exciting
Multi-brand franchisees have to keep on top of two or more businesses, and the role demands high levels of energy and enthusiasm, not to mention great organisational skills. Investors can exercise their entrepreneurial spirit and find stimulation in a busy work schedule.
Although overseeing businesses in multiple brands can be challenging, many people enjoy the thrill of developing a successful brand portfolio.
>> Read more:
- 4 Reasons Why Investing in a Franchise Is Worth It
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Advantages of multi-brand franchising for franchisors
There are three main benefits for franchisors who choose to work with multi-brand franchisees:
1. They can see the investor’s track record
When a franchisor welcomes an inexperienced investor into their network, they weigh up the pros and cons of handing over the rights to operate under their branding. Often, they have to trust the candidate’s ability to be a successful ambassador for the business.
Franchisors can look at the business portfolios of multi-brand franchisees to get the reassurance they need.
2. The investor has access to liquid funds
Multi-brand franchisees have a continual source of capital from their existing businesses, which gives them the opportunity to survive challenging economic periods and open additional units over time. As a result, franchisors can be fairly confident they’ll be valuable to the brand in the long term.
3. They can save money and resources on training
If a franchise candidate has already developed a number of businesses, the franchisor may not need to provide the same level of support they give less experienced investors. Being able to scale back training schemes and ongoing measures not only saves franchisors time, but money too.
Is multi-brand franchising better for franchisors or franchisees?
Although the advantages of multi-brand franchising for franchisees might spring to mind quickly, the system has its benefits for franchisors too. While investors building up a portfolio can gain financial security and access new opportunities, franchise owners can rest safe in the knowledge they’re welcoming experienced professionals into their brand.
If you’re an investor considering joining a second franchise company, find out more about the system in our guide, Franchising 101: The Pros and Cons of Multi-Brand Franchising.
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Alice Tuffery, Point Franchise ©