As franchisees become operationally and financially successful in owning and managing their first franchise, oftentimes they begin to look for new avenues of growth. As in multi-unit franchising, multi-brand franchising can be very lucrative and has become a growing trend in the industry. While restaurant operators continue to dominate in this space, other industries including financial, real estate, business coaching, automotive and hospitality, are also becoming popular as well.
Investment diversification is a big reason why franchisees might consider broadening their portfolio of brands. In an uncertain economy, operating brands in different market segments can balance each other out if one sector gets hit harder than another. However, in contrast to that, there are synergies that complimentary brands offer like referrals, shared services, co-brand marketing, etc.
Franchisors also benefit from multi-brand franchisee relationships. They have fewer franchisees to manage and are selling more units. Their franchisees typically tend to be successful operators who understand franchising and have industry specific experience.
As a franchisee, multi-brand ownership has considerable advantages:
- Centralized support. The existing infrastructure needed to support one franchise can oftentimes support other business units or franchise brands such as accounting, human resources, and operations. Here the multi-brand operator is growing profits without greatly expanding the home office staff.
- Balanced economic cycles. Operating brands in several market segments can help smooth the ups and downs of an uncertain economy.
- Balanced cash flow. Cash flow from one business can offset a slow market in another
- Co-branding. For brands that bring some synergistic value to each other like a similar target market, money can be saved in advertising, shared real estate, referrals, and marketing and PR support.
- Taking on a new challenge. For serial entrepreneurs always looking for that next challenge, the adrenaline rush of opening a new business or a new concept is addicting and more exciting than managing the daily operations of a single unit.
- Similar industry knowledge. Experienced franchisees can benefit from their existing knowledge and experience by investing in a similar concept in the same industry. Market understanding, co-branding, and less ramp-up time all contribute to reaching a higher level of performance faster and easier.
There are any number of growth strategies a franchisee can consider to begin building an empire. Whether investing in multi-units or multi-brands, profitability is in the numbers. Do your due diligence, speak to franchisees, and follow your gut instincts. My guess is, if you are considering this kind of investment, you’re already doing something right.