Will you invest in a multi unit franchise or a single unit franchise? Read on and let us help you decide.
You have made up your mind and you have decided to invest in a franchise business. Now the question is, will you invest in a multi unit franchise or a single unit franchise? There are a lot of questions in your mind at this point. Read on and let us help you decide which option is for you.
What Is a Single Unit Franchise?
A single unit franchise allows the franchisee to run one unit of the franchise business. This means that the franchisee will be responsible in the operations of the business. Franchise, a franchise development company says that established franchise brands do not offer single unit franchises. About.com adds that in single unit franchising, the owner has a particular territory covered by the unit. Furthermore, the same article quotes that most often, the franchise brand will impose certain miles covered by the franchisee in a single unit franchise option.
What Is a Multi Unit Franchise?
A multi unit franchise, on the other hand can operate more than one unit. This means that the franchisee has less direct participation in the daily operations of all the units. The franchisee manages the business at a much higher level. Franchising.com enumerates a lot of multi unit franchise companies in their site.
What is the difference between the two types of franchise?
In terms of investment, the multi unit franchise would require a larger investment compared to a single unit franchise business. Consequently, the multi unit franchise operations would also require you to hire more personnel to manage the various units while you oversee the overall franchise business. In a single unit franchise, you can micro manage the day to day operations even without hiring additional staff. You can even manage the business by yourself! In terms of the area covered, in a multi unit franchise, you will have access to a much wider region because you will be setting up various units. While a single unit franchise will give you a certain area most commonly in a metropolitan area to set up a franchise outlet.
Although both systems will operate a proven system the International Franchise Association draws a line between single unit franchise and multi unit franchise based on their ultimate goals. Single unit franchisees would like to have a stable business and does so at a slower pace. On the other hand, multi unit franchisees have a much larger plan and wants to expand more quickly.
When is a single unit franchise better than a multi unit franchise?
A single unit franchise is good for franchisees who are starting out. Normally, this is suitable for those ready to spend a smaller investment capital. According to B. Schroeter in a franchise article by M. Henricks, people with a lower investment resources should choose single unit franchises. Also, those who do not have much business management skills and experience should start with a single unit franchise. Because, the multi type may be too overwhelming for someone who is just starting to learn the ropes. Moreover, those who would like to be more hands on and would like to take it slowly a step at a time would be better off with a single unit franchise option.
When is a multi unit franchise better than a single unit franchise?
Not everyone is ready for a multi franchise business. However, with the right business strategies, capital and skills, this type of franchise will turn out more profitable. As mentioned earlier, it is perfect for business owners with more financial resources and capital to invest. SmallBizClub also tells us that multi unit franchises tend to give franchisees more discounts because franchisors offer reduced rates per unit when buying more than one. The same principle with wholesale of goods. Thus, the article posts that a much greater financial gain can be achieved with multi franchise unit business when you can afford it.
Is multi unit franchise here to stay?
According to FRANdata, more than 50% of all franchise units are now multi unit franchisees. This figure may tell us about the profitability of multi franchise businesses. Entrepreneur.com shares that multi unit franchise business did not dominate the industry in the past. However, this type of business now dominate the scene with 76.5% of franchised restaurants are multi-unit owned. This is telling us that multi franchise business is not just a fad.
How does a this type of business work?
Multi unit franchising can start with a single unit franchise business that expands when the franchisee buys another outlet unit. This is of course provided that it is allowed in the franchise agreement. Normally, this is because the single unit franchise had been successful. Another option is to have an area capable of situating various franchise units simultaneously at the start of the franchise business.
What are the types of multi unit franchises?
There are 2 types of multi unit franchise as explained by About.com. One is area development multi unit franchising while the other one is sequential multi unit franchising. In area development multi unit franchising business, the franchisee is granted rights to operate a specific number of outlets in a given time frame. Sequential multi unit franchising on the other hand, is when the franchisee is given additional units to operate normally under a separate contract. Some franchisors use sequential multi franchising as an incentive for franchisees to do well with their units. At this level, the franchisee is already considered to be an investor.
Are you ready to start your franchising business? Remember that no business is exactly alike. Your skills may be a perfect match for a single unit franchise. Or you may have the right resources to invest in a multi unit franchise business. Whatever your choice is, it is best to be connected with the experts in the industry.
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