Balancing Risk with a Multi-Unit Business Model

Multi-unit franchising offers entrepreneurs and investors great potential for diversity, creating a stronger business portfolio overall. By choosing a multi-unit path, franchisees can potentially lower the risk associated with investing in a single concept, cultivate alliances between units and receive higher returns on investment. To maximize the potential of the investment, choosing a brand should be based on carefully thought-out personal criteria and goals.

Best practices for reducing risk as a multi-unit franchisee include keeping these factors in mind.

Seasonal cycles – Mosquito Joe*, a Virginia-based mosquito treatment franchise, has been attracting tax-preparation franchisees due to the businesses’ complementary features. Mosquito Joe sees an uptick in sales over the summer and a dip during colder months, so franchisees who add tax preparation to their business repertoire can have a steady stream of incoming business. A second business keeps employees engaged and operating brands in different industries helps balance and minimize risk in an uncertain market.

Morning, Noon and Night – Whether pushing a product or service, consumers and businesses have needs at all hours of the day. If your brand makes the majority of its business in the morning, adding another concept that peaks in the evening makes for a stronger bottom line.

Read the agreement clauses–A franchise agreement has to be balanced and in-line with your professional goals. Read the clauses, as these can become even more vital when multiple units are involved. Examples of things to look out for include continuing guarantees upon transfer, liquidating damages if a unit fails, unclear image enhancement commitments and confusing territorial boundaries and protections.

Evaluate –When choosing an industry, narrow down the list of options and adhere to a list that will give you the greatest strategic advantage based on your outlined criteria and ability. Also keep in mind what businesses have the best chance of succeeding in your area. A solid concept may not make much difference if your region is already saturated with similar businesses.