Single-Unit vs. Multi-Unit: Which Franchise is Right for You?

The biggest decision an entrepreneur makes after picking which franchise they want to invest in is choosing what the scope of that investment will be. Some owners opt to start out with one unit, be it for financial reasons, operational capacity, a niche business model or various other reasons. Other franchisees have a big-picture outlook for their portfolio and seek out deals that allow them to grow quickly with multiple units. 

How do you know which route is best for you: single-unit or multi-unit ownership? The answer depends on several factors, and finding out requires looking at the logistics of the business and identifying one’s personal goals. 

Discuss Your Options with a Franchise Consultant

“If you feel overwhelmed and unsure about whether you should invest in a multi-unit or single-unit franchise, consider hiring a franchise consultant to help you make the most profitable decision,” suggests Hundred Acre Consulting.

These professionals specialize in connecting brands with new franchisees and work as a matchmaker to place the right people with the right systems. They are well-versed in the details and stipulations of various franchises and can help clients decide which company is a good fit for them and what kind of agreement. After hearing your list of wants and needs for business ownership, a consultant can advise you on whether signing for one unit or multiple is the best route. 

Evaluate Your Capabilities As An Operator

If you are just starting out in the franchising world or this is your first time owning a business, beginning with a single unit is typically the safest option. This allows you to get your bearings as an owner and truly understand how a franchise system works, perfecting your processes and ensuring you are successful and profitable. There is always the opportunity to grow and add on additional units or territories with the brand later once you are more comfortable as an operator and feel you have mastered running the brand. 

Experienced investors with more capital who have already built up their portfolio with other brands are more likely to initially sign for a multiple-unit development agreement. These types of franchisees are development-focused and typically have managers who work under them at each location, allowing them to turn their attention to scaling their ventures further. Often, a group of business partners will work together to operate a multi-unit franchise network.

Weigh the Pros and Cons of Each Agreement Type 

Single-unit franchises are attractive for those with less access to capital, as the fees associated with starting one business are less than multiple. Small Biz Club reports that many single-unit entrepreneurs use their savings or refinance their homes to pay the franchise fee, meaning they have a vested interest in the business’s success and work hard to see a return on that money. However, single-unit owners are not as profitable as their multi-unit counterparts. But with operations on a smaller scale, there are lower overhead costs, fewer staff needed, and less administrative work for the owner to take care of. On the flip side, this also means that single-unit owners are typically doing much of the work of the business themselves.

Multi-unit agreements require more capital upfront but also bring in higher profits for owners once the businesses are up and running because they enjoy multiple streams of revenue. Many brands also offer increasingly discounted franchise fees depending on the number of units a candidate initially signs up for. That buying power extends to other areas of the business as well, with owners of multiple units being able to secure lower rates from vendors and suppliers. 

Know that Both Are Suitable Avenues to Success 

Regardless of if you sign a single-unit or multi-unit franchise agreement, there is still plenty of success to be achieved and money to be made. Franchisors value both types of partners, and most welcome each kind into their systems — although some only offer one or the either. Both situations are a great setup for those who want to run their own business and be in charge of something they are proud of.

As the popular spa concept MassageLuXe puts it, “Both single-unit and multi-unit operators have their place in franchising, and both types of operators require different skill sets to achieve success. Honesty about your individual capabilities will be key to determining which type of ownership is right for you.”