Does Your Franchise Investment Add Up to Your Financial Expectations?
by Seth Lederman
Franchises have the advantage over other new businesses of less risk. When you buy into a franchise, you get the golden keys to making it work and reach profitability.
Before investing in a franchise, you should take several factors into consideration including; your risk tolerance, expected return on investment, salary replacement requirements, and the capital you’ll need to reach success, however you define it. Another factor that new franchise owners don’t consider often enough is how quickly you’ll reach those goals. Sometimes getting where you want to be financially isn’t feasible with just a single franchise unit.
Owning multiple franchise units can be an excellent way to hit your revenue goals faster if you proceed with due diligence, realistic expectations, and a plan to optimize efficiencies across your units. It is possible to obtain your goals, regardless of how lofty they are, but sometimes you have to go big or go home.
Franchises have the advantage over other new businesses of less risk. When you buy into a franchise, you get the golden keys to making it work and reach profitability. You are more likely to obtain funding since traditional lenders see less risk funding franchise businesses. Franchisors will give you a discount on franchise fees when you buy more than one unit. Owning multiple units is quickly becoming one of the preferred ways of lowering operating costs and boosting earning potential for franchise owners.
What Are the Advantages of Multi-Unit Franchising?
There are four main benefits of owning more than a single franchise, which is why entrepreneurs are buying them up and getting wealthy doing so.
They Generate Higher Profits
There is no way to downplay the reality that owning more franchise units comes with inherent risks. The more that you own, the more risk you take on. So why would anyone want to put themselves in that position? The more franchise locations you own, the higher your overall sales will be. Also, since the location is one of the most important factors to success, you can leverage one location against another so the weaker units are offset by the high-performing ones and you don’t have all of your eggs in one basket.
Franchisors Love Multi-Unit Franchisees
Every time someone wants to buy a franchise, they have to be vetted. It takes a lot of time, resources, and energy to find qualified prospective buyers. If you are willing to take on more than one franchise, it replaces the franchisor’s need to find someone new and go through the process all over again. Once vetted and approved, you are already qualified to do it again. It’s becoming so popular with both franchise owners and franchisors that some franchises only offer multi-unit ownership.
A Strong Team Means More Freedom
When you run multiple franchises, it requires a reliable team. With a team that you can trust to oversee everything from sales to management, you have more free time to pursue your dreams. Not having to be “hands-on” is a huge advantage when it comes to enjoying life.
Bulk Buying Power
Bulk buying and bundling typically help to reduce the cost associated with franchise operations. While it seems counterintuitive in that more locations lead to more expenses, vendors are willing to set lower prices for larger bulk purchases.
Cost-Effective Structure With Savings and Efficiencies
One of the main advantages franchises have over other business startups is that they often allow for easier expansion without astronomical capital requirements. For multi-unit franchisees, expansion becomes even easier because they come with a cost-effective structure for efficiencies and savings. If you have a clear path for expansion, it will help to keep things on track. Things to consider are whether you have to buy additional territories and what the maximum is before you are entering into an area development agreement vs. a multi-unit agreement.
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The Franchisee Journey
The only way to achieve your goals is to know what they are and what it takes to get there. Mapping out your franchise growth journey is the best way to make incremental steps towards success. Once you reach one level, you then proceed to the next. Much like a business plan, it can help to get you to your financial goals.
The more units you have, the better pricing becomes for bulk items. Again, overhead also decreases because you can share resources from one franchise unit to the next. You can share talent and staff across locations to fill in gaps as needed and share services like human resources and accounting.
The marketing money you spend will be shared across all your units, so you are getting more bang for your advertising budget. It also allows you to test promotions and advertisements with a statistically significant number of customers to maximize their results.
Franchise ownership comes with several advantages over other types of businesses. For those who are willing to follow a proven system, multi-unit franchises are a good way to expand quickly, scale your revenue, and realize your financial dreams faster.
“Treat a man as he is and he will remain as he is. Treat a man as he can and should be and he will become as he can and should be.” –Stephen R. Covey
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