{{title}}
{{byline}}
{{byline}}
With more than 420,000 franchised units owned by 234,000 franchisees in the system, multi-unit operators (MUOs) are shaping franchising’s future. Notably, MUOs in the U.S. control more than 50% of all franchised units, marking a substantial shift in the franchising paradigm.
According to our latest data, the number of MUO franchisees with more than 50 units has surged by an impressive 112.3% since 2019 with certain sectors exhibiting even higher concentrations. MUOs hold a significant share in various sectors, dominating 82% of QSR units, 71.5% of beauty-related franchises, and 72% of sit-down restaurants across the U.S.
In 2024, large multi-unit ownership and consolidation will continue to gain traction. One key driver of this trend is the positive perception of multi-unit franchise operators by the lending community.
There have been significant changes in the eligibility and application process for Small Business Administration (SBA) loans. In addition, repayments and refinancing out of SBA loans negatively affect secondary market premiums, reducing the amount of capital an SBA department has to lend. These factors are pushing lenders to target high-quality borrowers. Interest rates may remain unchanged longer than anticipated because the Federal Reserve isn’t expected to make cuts until later this year. This further emphasizes the need for borrowers to be financially well equipped as business loans become less affordable.
Another prominent trend is mid-to-large-sized multi-unit owners acquiring brands outside of their typical industry. For example, seasoned QSR franchisees, known for their successes with brands like Papa Johns and Qdoba Mexican Grill, are targeting Phoenix, Arizona, with a multi-unit franchise agreement with GLO30, a skincare franchise concept. Our analysis of Dunkin’ franchisees shows that 14% own another franchise brand, and those brands range from oil change concepts to optometry and health clinics.
In addition, multi-unit franchisees are actively exploring diverse strategies to fuel growth, and one approach gaining momentum involves considering alternative locations, like airports and travel centers. Nontraditional locations present opportunities for franchisees to adopt various business formats, catering to emerging trends and consumer preferences. It allows them to broaden customer outreach and operate with lower overhead costs, promoting efficiencies. Franchisees from well-known brands, such as Arby’s, Taco John’s, Wendy’s, Bojangles, McDonald's, and others, are successfully expanding their footprints this way.
The trends in multi-unit franchising reflect a dynamic industry responding to economic shifts, regulatory changes, and entrepreneurial ambitions. As the landscape evolves, adaptability and strategic decision-making will be pivotal for stakeholders navigating 2024.
Christina Niu is director of research at FRANdata.
View Original for Full Data Table
SOURCE: FRANdata