From One to Many: How Multi-Unit Franchise Ownership Can Expand Profitability 

For entrepreneurs who want to take some of the guesswork out of owning a business, franchising comes with several benefits. It includes a proven business model, built-in support teams, and access to centralized marketing, accounting, and customer service programs. That means franchisees can build their business more quickly and with less risk.

But one of the biggest benefits, and one of the reasons many potential business owners choose franchising over startups, is the opportunity for expansion. While there is a chance a franchise owner can grow his or her sole location into a local powerhouse, the best way for franchisees to increase their customer count is by owning more than one unit.

Entrepreneur Magazine reported in 2022 that multi-unit franchise owners accounted for more than 54% of all franchised units, and more than 45,000 multi-unit owners controlled nearly 228,000 franchised units in the United States. The trend of multi-unit ownership is expected to continue because it offers diversified revenue streams to franchise owners while making them less vulnerable to economic challenges.

In the franchising world, franchisors set up territories to provide local owners with viable markets where they can grow without fear of competition from anyone else in their franchise. 

But being limited by territorial growth can restrain an enterprising spirit.

A solid foundation

As a franchise owner considering opening another location, you need to ensure your current business is running smoothly and turning a profit. By following your franchisor’s business model and utilizing the resources it provides to its franchisees, you should have already built a solid foundation at your location.

Unfortunately, this can also mean you have saturated your territory, limiting your ability to grow. In franchising, encroaching on other territories is poor form. Doing so may result in fines or even the termination of your franchisee contract. But if you’ve picked a growing franchise or family of franchises, you can always consider becoming a multi-unit or even a multi-brand franchise owner.

A successful expansion into a new territory or with a new brand is only possible if your first franchise location has a solid team and a track record of success.

When to grow

While it may be your desire to own all the territories near your first location, merely having the will isn’t always the most successful strategy. You also need to show that your profit and losses (P&L) and key performance indicators (KPIs) are meeting your franchisor’s goals. You should also be confident that the team at your current location has the tools they need to run your franchise location in your absence.

Setting up a new location in another territory will take effort but it shouldn’t be the same lift that was required with the initial launch of the business. Even with strong financial support and dependable staff at your first location, an assessment of your abilities to tackle multiple locations should take precedence. This evaluation should also include research on the competitive landscape, your legal ability to own multiple territories within your franchise, and your relationship with your franchisor.

Always take a step back to make sure you have all the financial resources and tools you need to build a second or third location before proceeding.

A positive mindset

After careful valuation of the tangible assets, you must have before becoming a multi-unit franchise owner, you should also consider the intangible impact that a positive company culture plays in your expansion.

You may be running one successful location but if you have any questions about your cultural fit within the greater franchising organization or envision that the new location won’t fully align with the brand values, owning a new territory might not be the best option for you.

Owning more than one franchise brand has its practical advantages. It not only simplifies the startup process as you become more familiar each time you open a new territory, but it also makes it possible to spread financial resources across multiple locations to mitigate risks and increase profitability.

R. Scott Sutton is chief development officer with Empower Brands.