For many franchisee entrepreneurs, the opportunity to run their own businesses with the support and recognition of an established brand is the realisation of a dream. But what if achieving the dream is not enough? What are the options for already successful franchisees to continue growth, be challenged and prosper?
Become a multi-unit franchisee
A single franchise unit can be a lucrative endeavor, but many franchisees aspire to expand and become multi-unit franchisees. Becoming a multi-unit franchisee means owning and operating two or more business units within a brand framework.
It makes logical sense if a franchise has been successful within a brand and business unit that they would be able to successfully open further units; at the end of the day, franchising is about repetition.
There are numerous benefits in pursuing this model including economies of scale: two or more business units may utilize the same back-room resources such as accounting, human resources and administration. Second or further units may also provide a pathway for developing and retaining key personnel.
Multi-unit franchise ownership can reduce risks over time – one unit may perform better than the other at certain times of the year or certain phases of the economic cycle.
Multi-unit ownership may also be easier for a franchisee entrepreneur to fund, they have the dual benefit of the franchise model and performance benchmarking and their own track record within the brand.
What if multi-unit franchisee ownership is not available?
There are potentially several reasons why multi-unit ownership within a franchise brand may not be an option. For example, a particular market may only be able to sustain one unit, or perhaps the franchise business model does not support, or the brand does not allow, multi-unit ownership.
Franchising is about repetition
An often-followed path by many successful franchisees is a rinse and repeat cycle. The model is straightforward, the franchisee understands the brand and how to be successful within the brand, they open or perhaps acquire and develop a franchise business unit, sell for capital gain, and repeat the process with another.
Whilst this can be commercially beneficial, for some franchisees it does not provide the challenge and growth component.
Diversify into a second or different brand
Where a market may not sustain the addition of a second particular brand franchise business unit, a viable option for a successful franchisee can be to open a business unit of a second or different brand.
In New Zealand this is usually under the umbrella of the same franchisor.
It’s not uncommon for franchisors to own and operate more than one brand, usually within the same general category, such as food and beverage, retail, or a cluster of home or commercial services.
This is often to diversify the franchisor’s business but can also be to provide multi-unit and growth opportunities for franchisees.
Overseas an area of significant growth is multi-brand ownership, where a franchisee may own units across different brands and franchisors. This can provide true diversification benefits as well as opportunities for growth and cross-pollination for both the franchisee and franchisor.
Move from franchisee to master franchisee
Finally, and an area of opportunity for successful franchisees, perhaps underdeveloped in the New Zealand franchising eco-system is the transition from ‘franchisee’ to ‘master franchisee’. A master franchisee has the right to develop multi-units in a region and or multiple regions and, or, to appoint sub-franchisees.
Whilst they must operate within the franchise framework, they in effect become a mini-franchisor and benefit from increased autonomy and an ability to be increasingly entrepreneurial, particularly in the areas of business development, marketing and supply chains.
Master franchisee ownership also provides diversification of income, usually by franchisee fees, possible supplier rebates and, or, margin from being part of the supply chain. It can also provide a successful franchisee the challenge and privilege of sharing their knowledge, experience and successes with the next generation of franchisees.
Whilst franchisee success is usually achieved by sticking to the system, beyond one business unit for the successful franchisee there are a number of tried and proven methods to continue to grow and expand upon their success.
Related: Five questions for franchisors eyeing growth in 2024
