Multi-Unit Franchising 101: Going from 1 to Many Franchise Locations

When a business is well developed, a multi-unit structure can create a fantastic business opportunity for both franchisees and franchisors alike. 

Multi-unit franchising is when “a franchisor awards a franchisee the right to operate more than one outlet within a defined territory,” says Franchise Direct. In 2019, FRANdata figures showed that multi-unit franchise operators control a remarkable 54% of all franchised units in the U.S. There were a total of 43,212 multi-unit operators controlling more than 223,213 franchised units across the country. 

The steady expansion of multi-unit dominance began in the late 1980s. And as recently as 2011, a majority of units were controlled by single-unit operators. The multi-unit takeover has consistently grown around 1% each year. 

Before deciding to go down the multi-unit route, there are several things to know. 

Choosing the Right Path

Typically, there are two typical paths to multi-unit ownership. 

In some cases, a franchisee will slowly expand outward after seeing success at a single location and develop a network of multiple units. In other cases, franchisees become area developers, meaning they enter into an agreement with the franchisor to hold exclusive rights and the responsibility to develop a given region or market. Each approach has perks of its own, though both can lead to a successful business.

When determining how many units to open, there are plenty of options. The industry average is around five locations, but that is certainly not the limit. For example, NPC International, the largest restaurant franchisee, holds over 1,200 fast-casual, quick-service restaurants. Other groups, such as Flynn Restaurant Group and Carrols Restaurant Group, also have thousands of locations scattered across the United States and abroad. 

Why Team Selection is Key

When it comes to what makes him a successful multi-unit operator, there are several ways to ensure success. One thing many successful multi-unit franchisees can agree on is that it’s all about selecting the right team. 

This is something Steve Isom, the executive vice president for Stonebriar Auto Services, LLC, who oversees 34 Jiffy Lube Multicare locations across the country, emphasizes to those looking into expanding. “You need to be sure that you are hiring leadership and employees who reflect your values so that when you grow to more locations, your mission statement doesn’t get diluted,” he said.

Isom added that franchisees looking to grow their portfolio also need to hire that leadership sooner rather than later to ensure a cohesive team from the start. “My advice is to bring in the necessary leadership a little on the early side so that they can fully understand what is important to you,” he said. “This will ensure you can open multiple locations successfully.”

Salem Najjar, who owned nine Tropical Smoothie Cafe locations by the age of 31, shares a similar sentiment. 

“The first way that I measure success is the attitude of my employees,” he told 1851 Franchise. “If they’re motivated, positive, and, most importantly, if they're reporting to me that they feel successful, then I feel successful.”

There are also customers to consider, of course. “If they feel happy, we will hear it come through in their feedback,” Najjar said. “And there will be a direct correlation with our sales growth, and that will make me feel successful.” 

Benefits to Expect

Generally, multi-unit operations are considered lower risk, providing a higher chance of success and higher return on investment. Additionally, the higher revenue and income that multi-units provide offer the financial ability to have a better work-life balance. 

Sometimes, franchisors even provide financial incentives to franchisees who purchase multiple units at the same time. Some may also charge lower royalties when franchisees reach certain revenue breakpoints. 

Investing in multiple locations also has a diversifying effect on a franchisee’s portfolio.  By opening multiple units under the same brand, a franchisee has the opportunity for both a smoother operational experience and to create an internal network of sorts. This is especially the case when units are close together in location, allowing for supplies or personnel to be shared between them. 

Who Should Consider Multi-Unit Franchising

The multi-unit model may or may not be right for a wide range of investors. However, many franchisors will not award franchisees additional units until they have successfully operated one unit. 

Therefore, approaching additional developments is easier or more predictable for franchisees who have been through the process before. From getting started to daily operations, a multi-unit franchisee who has experienced the franchise model already can use the information they have learned to expand, which could potentially mitigate certain risks.