While driving down the road, have you noticed there are more of the same franchises popping up in surrounding areas? Perhaps you’ve seen three Dunkin Donuts within a 10 mile radius. These are likely owned by a multi-unit franchisee.
What is Multi-Unit Franchise Ownership?
A multi-unit franchise involves an agreement which provides a franchisee with the rights to develop more than a single unit. Multi-unit franchisees are people who can buy a territory with several units. Many franchise owners build them over a relatively short period of time, say, six months to a year.
Why People Become Multi-Unit Franchisees
Just like retail stores attract customers with a BOGO (buy one get one free) offer or a discounted sale price for multiple items. Franchisors offer reduced rates per unit when buying more than one.
For example, AKT, a fun, unique dance-based concept, and CycleBar, the only indoor cycling franchise, offer the same tiered pricing structure for multi-unit franchisees. When AKT and CycleBar award franchisees the right to open multiple units, they charge a onetime development fee which depends on the number of units a franchisee opens. Here’s an example of the breakdown:
- 1 for $49,500
- 3 for $41,667 per unit
- 4-5 for $40,000 per unit
- 6-9 for $35,000 per unit
- 10 or more $30,000 per unit
Anna Kaiser, founder of AKT and celebrity trainer, says “My mission has always been to bring a new model for fitness to a wider audience. I truly believe our classes provide the best of fitness today in a fun and supportive atmosphere and help our members see the results they never thought possible. I am beyond excited to expand AKT and share this incredible workout with the world.”
Some franchisors, especially in the health and fitness industry, found the way to succeed in the competitive boutique space was to rely on multi-unit franchisees. Therefore, today, many successful franchises award contracts to multi-unit franchisees.
As a multi-unit franchise owner you can:
- See a much greater financial gain in the long run
- Have increased negotiating power with real estate developers
- Receive preferred pricing on supplies, products and marketing services
- Realize cost savings on labor because you can house human resources and accounting departments under one roof
From the franchisor’s perspective, the benefits of offering multi-unit franchises are:
- It develops the brand quicker. This is especially important when introducing a new concept or theme –to be the first to appear “on the scene”
- The franchisees are more sophisticated and often have existing relationships with vendors and real estate professionals
- A smaller group of owners to train and manage. Efficiency is key – it is easier to train 1 experienced person than a dozen with different levels of experience
- Access to capital, infrastructure and human resources
Facts and Stats
According to FranData, multi-unit franchisees currently own 53% of the 450,000 franchise units in the U.S.
Multi-unit owners now control 76% of franchised restaurants.
Multi-Unit Franchise Ownership in a Flash
Want to view some interesting tidbits about multi-unit franchise ownership? See below for a useful Franchise Solutions’ infographic. Get a quick snap shot of the sector including trends, statistics and a comparison of multi-unit and single-unit ownership.