By Bill McPherson
PostNet Vice President of Retail Network Development
Multi-unit franchising is one of the premier ways for franchisees to scale and expand their business. In fact, according to a 2023 report in Forbes, multi-unit franchise owners were in charge of 54% of all franchise units in 2019, and 43,212 multi-unit operators controlled more than 223,213 franchised units in the U.S. While there is an increased risk when venturing into multi-unit franchising, it can be more profitable for entrepreneurs looking to successfully scale and expand their business beyond their general market.
There are several things to consider before taking the dive into multi-unit franchising. There is typically a higher upfront investment if the plan is to start off by purchasing multiple units. If you already have a franchise and are looking to expand, you will need to ensure you have proper funding to help finance the venture without sacrificing profitability of your existing location(s).
In addition to funding, it is also vital to have a strategy in place for the expansion. That plan should include strategic location, inventory, equipment and the timeline for when the locations will open. It’s important to consider each of these before taking the plunge.
Here are a few additional mistakes to avoid when scaling and expanding through franchising.
Spreading Yourself Too Thin
While it’s important to have funding and a strategy in place, it’s also paramount to consider your own time. Are you already spread too thin with just one location? Do you have other commitments that may be affected by opening multiple locations? If the answer is yes, you may simply not have the capacity to run multiple locations at once. While the earning potential can be higher with multiple units, you would be making a mistake if you don’t have enough hours in the day to maximize each location’s potential.
Hire the Wrong Members for your Leadership Team
To be a successful business, you must have the right team in place. The same applies to those looking to expand. Without the right team, one or all of your locations could become less efficient and be prone to poor customer experiences. As the owner, you won’t be able to be in multiple locations at once, so it will be up to your staff to run the day-to-day operations. In addition, you will need to ensure you have the right financial metrics and key performance indicators in place. Hiring or promoting the wrong individuals in leadership positions can jeopardize your expansion plans.
Lack of Understanding of Franchisor Expectations
At the macro level of multi-unit expansion, it’s important to have a complete understanding of the franchisor’s expectations for multi-unit operators. While franchising as a whole is similar, each franchisor has its own rules and guidelines for multi-unit growth. Do they require you to remain a present and visible owner for each location? How much revenue do they want you to make for each location? These are both valid questions a franchisor could ask when you indicate that you want to expand. If your goals as an owner don’t match those of the franchisor, you could be making a mistake.
Understanding the franchisor’s support system for multi-unit owners is also important. A franchise needs more sophisticated and accessible systems to adequately assist owners with multiple locations, from high-quality software to owner training and tools. If the franchisor doesn’t supply advanced systems, expanding may not be a profitable venture due to you relying on your own resources to grow the company. Luckily, most of these questions should be answered during the discovery phase, well before making a commitment.
Scaling and Expanding
For entrepreneurs in franchising, there will continue to be an interest in purchasing multiple units when expanding their business. The venture could result in increased profit and stability while also securing your place in the market. But diving into multi-unit franchising prematurely or without the proper information could be detrimental to you and your business. Outside of proper funding and a firm strategy, not having enough time or your franchisor’s lack of proper support could lead you into some challenging times. Expanding because you want to make more money is important but should not be the entire reason. Consider your long-term goals – retirement planning/exit strategy, passing the business on to a child, etc. – when determining your plans for expansion.
Bill McPherson is the vice president of retail network development for PostNet, a global leader in high-quality printing and shipping solutions, and AlphaGraphics, a leading franchisor of printing and marketing solutions. With over 28 years of franchise leadership, he has led franchise development and real estate for B2B, B2C, retail, and in-home senior care concepts.
For more information, visit https://postnetfranchise.com/.