The Do’s and Don’ts of Multi-Unit Franchising: How To Grow Sustainably

It’s no secret that multi-unit franchising is on the rise. With more franchisors and franchisees than ever exploring it as an expansion strategy, some franchise development teams exclusively focus on attracting candidates for multi-unit deals.

The benefits of multi-unit franchising stretch well beyond franchise development, especially when it comes to day-to-day operations. Just think of how much time and money is saved when you streamline operations within one unit, let alone streamline operations between several. 

However, franchisors growing too quickly could pose major risks to the franchise system, and franchisees growing too quickly could pose significant risks to their investment.

The Pros and Cons of Multi-Unit Franchising

One of the most noticeable pros of multi-unit franchising is the ability to expand without onboarding and training additional franchisees. This saves franchisors time and money and offers additional revenue opportunities for their top-performing franchisees.

Multi-unit franchising can also help streamline day-to-day operations. For instance, many multi-unit franchises employ the same managers to oversee multiple locations, get deals with vendors to supply to multiple locations, and, therefore, increase profit margins with additional units. These economies of scale also benefit the franchisor, as less money is spent on operating costs.

On the flip side, multi-unit franchising comes with its own set of challenges. For franchisees, this often means giving up some control and learning to delegate. Since they can’t be in multiple places simultaneously, they’ll have to hire more managers to help them oversee their units and teams.

Growing Steadily: How Fast Is Too Fast?

Another con comes into play when franchises grow too quickly. Expanding without a strong foundation can be costly, and even detrimental, to a franchise system and the individual franchisee. 

Expanding sustainably requires a careful balance between growth opportunities and maintaining quality and consistent unit operations. Often, multi-unit deals come with specific, staggered opening dates for each unit to ensure that each one is set up, running smoothly, and profitable before the next is opened.

How To Tell If You’re Growing Too Quickly

Luckily, there are a few telltale warning signs of overextension, starting with operational inefficiencies. Quality control, customer service, and brand standards may decline as resources are stretched thin across locations.

Suppose you notice a unit is struggling with poor customer reviews, high employee turnover, understaffing, or poor P&L statements. In that case, expansion should be put on the back-burner until each issue has been addressed and improved upon.

Meanwhile, highly profitable units with solid teams in place, high customer satisfaction, and steady operating costs should set a strong example for other franchisees looking to expand.

Best Practices for Sustainable Growth

1. Follow the franchise model. Franchising itself has many benefits, including a scalable model. The more a franchisee follows the model, the more likely they are to expand with it since it was built to be replicable across units while maintaining brand standards.

2. Build a team you can trust. Franchisees who build strong leadership teams will set themselves up for success as they expand. The willingness to let go of some control and delegate will prove essential, as it is nearly impossible for one franchisee to oversee multiple units all the time without the help of great managers.

3. Choose your suppliers wisely. Franchisors can set franchisees up for sustainable growth by investing in reliable, consistent, and scalable technology. Vendors serving franchises and multi-location businesses are built to balance standardization with flexibility. Choosing suppliers with smooth automations, integrations, unit-level reporting, and a knowledgeable support team are investments that will be well worth it as you continue to scale.

4. Expand strategically. Avoid expanding simply because an opportunity presents itself. Consider factors like proximity to existing units, local market conditions, and whether your team and resources are ready for growth. 

5. Pace your growth. As mentioned above, growth should align with your business’s ability to maintain quality and profitability. Set realistic goals for expansion, allowing time to stabilize operations at new locations before taking on additional units.

Remember: There Is No “One Size Fits All” for Multi-Unit Expansion

Each franchisee’s journey is different. Some may sign multi-unit deals to begin with, others may decide to expand down the line, and others may choose to acquire units that become available rather than building more from the ground up.

Whichever way a franchisee chooses to expand, it is up to both them and their franchisor to ensure they are ready, equipped, and set up for long-term success.

Want to learn how to grow your franchise sustainably? Join me, along with an all-star lineup of franchisors and franchisees on October 24th at 11:00 am at the Franchise Business Review Summit for the breakout session, “Mo’ Units, Mo’ Problems: How Ops Support Teams Smooth Brand Expansion,” where we’ll explore real experiences in multi-unit franchising.

Thank you to CareerPlug for being a sponsor of the 2024 FBR Summit.

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