Guide To Buying Another Franchise: Decide What Your Financial Outcome Is

Expanding a franchise portfolio to include a second brand can be a great way to reach new financial, leadership and entrepreneurial goals. However, for owners looking to grow in this way, it’s important to carefully consider the “why” and “how” before diving into the “who” and “where.”

“While financial reasons are the most common in deciding to expand, there are other reasons as well,” said Keith Liscio, founder and president of Excelsior Franchise Center. “Sometimes it's a matter of adding a complementary business to the portfolio. This is common with franchisees that own home service brands, for instance. The owner of a company that provides lawn mowing services might add a franchise that adds lawn maintenance or mosquito control.”

Multi-unit and multi-brand ownership brings a range of financial perks. For franchisees envisioning a business empire, the other benefits of franchise scale may be less important; they may choose to pursue the opportunity with the highest return on investment. 

Considering other financial outcomes — like the ability to share costs between multiple operations, access to economies of scale or the opportunity to capture steady revenue that will boost income and allow for long-term reinvestment in the business — may guide you in a different direction.

“The spreading of fixed costs is probably one of the biggest [efficiencies] gained by multi-unit owners,” Liscio said. “Office expenses, vehicles and staff can be applied to the new units, thus increasing the profitability of the overall organization. Also, marketing expenses can be reduced if the new franchise attracts a customer base that is similar to the existing one.”

The opportunity to scale this way is attractive to many franchisees, but it is not the only driver for growth. There are cases where franchisees are simply looking to expand to broaden their own horizons, pursue personal development or bring a much-needed resource to their communities.

“Sometimes owners just master a system, have solid managers in place and don’t want to expand further geographically,” Liscio said. “Adding another franchise gives them the opportunity to grow and challenge themselves with a new business [without pushing their boundaries].”

In situations like these, the financial representations of a given business model may not be the top priority, but they should still be a part of the consideration process. After all, it takes money to make money, and successful business owners shouldn’t rely solely on the success of their established business to fuel the long-term support of an underperforming passion project.

Regardless of the financial end-goal, Liscio recommends careful planning and collaboration with a franchise expert to support the best possible outcome.

“Experienced franchise brokers have hundreds of options that the franchise owner has probably never even heard of,” he said. “We’re in a position to evaluate their situation, assess their goals and present options that create a symbiotic relationship with their existing business.”

Every great franchisee had help buying a franchise. Want to learn more about how 1851 helps franchisees find the right franchise opportunity? Visit www.1851growthclub.com and start your journey.