6 Top Reasons to Buy Three Franchise Units Instead of One
October 17, 2017 11:00 AM
You’ve decided to take the plunge and become a franchise owner. Now there are so many decisions to make..what type of franchise should I run, what are the options in my price range, and of course what type of location is best for my franchise unit? What you might not think to consider, however, is should you buy three franchise units instead of one?
While this may seem like a way bigger investment especially when you are just starting it out, it may surprise you to know that that it is a growing trend in the franchise world. Actually more than half of new franchise purchases are multi-unit purchases.
Now of course one important caveat is that buying three franchise units instead of one is not the right move for everyone. Don’t feel compelled to keep up with the Jones or the Kardashians or whatever. Seriously analyze all the pros and cons of a multi-unit purchase vs a single unit and make the best decision for your particular situation.
Here are the six top reasons to buy three franchise units instead of one:
Lowers Your Overhead Expenses Per Unit
While the initial startups costs will be higher for three units, once your units are established, you will be able to lower your overhead expenses per unit because you will have some fixed costs that will be shared across all three locations. For example, if all three locations will share the same vendors, then you will be able to negotiate better deals for goods and services.
Offers You Better Stability
I am certain you have heard the horror stories of new franchise businesses folding in the first year. That is a big fear for new franchise owners, but it doesn’t have to come to fruition if you plan right. And part of your plan is to start with three units right from the get go thus improving your chances of success. Each of your units can help buoy each other up if lean times hit.
It Is Not as Expensive as You Might Think
While you will have to be more money, it might not put you in the hole as much as you might think. Franchiser owners often offer discounts and incentives to their franchisees if they purchase multi units. If you know you want to eventually expand anyway it might make sense to buy them now at a lower cost.
Helps You Establish A Stronger Brand
The franchisor will be providing you with some marketing and advertising messaging to help attract customers, but the great thing about owning 3 units is that you can establish your brand within the larger brand, but showing the customers what makes your three units stand out from the rest. And because you will want the same central message across all three units, you will be able cut down on the money spent of advertising and marketing.
Some Franchisors Will Only Sell Multi Units
You will have more options to choose from if you are willing to buy more than one unit. Some franchisors prefer to sell units this way because territories can be developed more quickly. They also tend to prefer to work with just handful of franchisees who each have several units then a large pool of single owner units who tend to struggle more.
Will Help You Establish Stronger Relationships
Another benefit of owning more units is that you will develop more contacts in the franchise world and with vendors and real estate agents.
Before making any final decisions, sit down with some trusted financial and legal advisors to go over all the pros and cons of buying three franchise units instead of one. Going through is a bigger investment and requires a lot more responsibility, but if done right can reap many rewards for you.
Besides the financial investment you might be wondering how you will juggle all the responsibilities of three units. Franchise experts who have been down this road before suggest hiring a general manager to oversee all your units and then a manager for each unit. That way you can set up meetings with all of them to go over how each unit and the overall brand is developing. The key is to have a general manager and managers who are as invested as you are in making the business a success and who share your overall vision for what you want the business to be.
A franchise consultant can be really helpful going through this whole process, including picking the right franchise to buy into. They will help you go over your finances and make a good list of what you are looking for in a franchise business. They can also help you with all the legal paperwork. They should be able to steer you away from franchises that are not a good fit for you and whether a multi-unit purchase is right for you. Because they know the industry so well, they will be able to connect you to so many more potential franchisors then you could on your own.
You do have to be careful though if they are being paid for by the franchises. If you are getting their services for free and the consultant earns a commission from the franchise you buy into, it can be problematic if you are not careful. You need to make sure they are not going to push a franchise on you just to make a sale. You want to make sure they have your best interests at heart. It is always a good idea to ask for referrals so you can see what other clients have said about their experiences with this consultant. Also, do some digging on your own.
Of course if you are going to pay for the consultant’s services, then you will want to make sure this is definitely what you want before you sign a contract. You don’t want to pay for a consultant if you are not hundred percent sure this is the path you want to take.
If you think a franchise consultant can help, consider MBB Management. Some of the services MBB Management offers you include franchise development for new franchise programs, strategic planning for franchise growth as well as help with all the legal documentation involved. They also offer assistance with developing operations and training documentation and franchisee recruitment marketing strategies.
Want to know more? Contact MBB Management today.