Multi-unit franchising continues to expand in 2006. And the "Area Developer 50" continues to track the industry's transition from its early decades of single-unit owners to today's multi-unit owners and area developers. 2006 marks the third year of what might be called "The Shift": more franchising units controlled by multiple unit franchisees than by single-unit owners, according to statistics compiled by FRANdata, which puts the number at 52 percent.
Area Developer magazine again asked the experts at FRANdata to dig into their industry database to create a list of 50 franchise systems with significant concentrations of multi-unit operators. In fact, they provided several "slices" of data, two of which Area Developer has chosen to demonstrate the rise of the multi-unit model in dramatically different ways. Only 12 systems appear on both lists.
(Note: The Area Developer 50 is not a traditional "Top 50" listing. Rather, it is designed to provide insights into the state of franchising and the range of companies using a multi-unit model for growth.)
The first table ranks 50 systems by the highest percentage of units controlled by multi-unit franchisees. The first eight brands on this list have 100 percent of their units in the hands of multi-unit operators--but their total number of units is not very high, ranging from 69 to 260. Factors such as cost, complexity of operation, and relative youth are factors in this listing, but for these 50 brands, the focus clearly is on expansion through a multi-unit model. (Only four of the top 10 are food.)
The second table ranks 50 systems based on their total number of multi-unit franchisees. Subway's 3,638 multi-unit owners are more than four times as many as the next brand, Dunkin' Donuts (852). The systems in this ranking show a predominance toward easier operation, as well as generally being older and more established; and of course they have a greater number of units, ranging from 757 to 8,205. (Eight of the top 10 here are food.)
The percentage of multi-unit owners vs. single-unit owners is one way to evaluate a franchisor's strategy. It's also useful to look at how many actual units are controlled by multi-unit owners. For example, in Subway's case, 44.3 percent of its franchisees are multiple-unit owners, but they control 74.8 percent of its units.
Multiple unit and area development models represent the future of franchising. They offer 1) tremendous business opportunities for owners and investors, and 2) an efficient, rapid way for franchisors to expand. But they're not for everyone, nor are they exclusive for a given brand; most systems offer several ways for franchisees to buy in.
Four basic models exist in franchising today, says Darrell Johnson, president of FRANdata. The simplest can be said to represent the past 50 years, and the more complex models indicate the direction the industry is headed. All four are necessary, and all are appropriate for different concepts at different stages of development. Johnson describes them as follows:
"That's when it's a true corporate business: the business of owning units," says Johnson.
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