Economies of Scale: Franchisors see Common Cause with Multi-Unit Operators

Not too long ago, Launch Family Entertainment found itself in full-on survival mode.

Covid-19 was spreading across the land, and business at its indoor recreation facilities was at a near standstill as it was throughout the entertainment and hospitality industries.

In the downtime, the franchisor focused on the welfare of its staff by implementing stringent safety protocols. Brand leaders also decided to turn inward, reset, and refine the brand’s concept.

The company emerged from the pandemic with an ambitious plan for strategic growth, spurred by an infusion of capital from Silver Oak Service Partners. The brand added three units as business rebounded, bringing its total to 27. This year, seven units are under construction. In 2025, another 12 are expected to open, bringing the number to 46. 

Like many brands, Launch Family Entertainment is looking to multi-unit franchisees to help drive its expansion. “We have a lot of white space, and that attracts investors to come in on the ground floor. They can buy a territory and put their mark on it,” says Chief Development Officer Jeff Todd.

While the brand remains committed to its single-unit franchisees, he says, “The majority of the owners and investors that we’re talking to have aspirations of becoming multi-unit, and we offer white space with a model that we believe is really viable.”

Today, more than half of the franchise industry is controlled by entrepreneurs who own and operate two franchise locations or more. Brands are increasingly wooing multi-unit operators to help fuel their growth for good reason: A franchisee who is successfully running more than one location or territory most likely already possesses operational know-how. That’s a valuable commodity for all brands. Lenders also place a high premium on experience.

A meticulous evaluation

Launch started as a trampoline park in 2012. The concept gradually evolved to include something for every family member. There are trampoline courts, arcades, and rock-climbing walls. Add to that bowling, laser tag, ax throwing, a restaurant, a bar, and more. The brand found its niche in a diversified attraction mix.

“It’s full-family entertainment. A lot of entertainment focuses more on the adult—sports bar or things of that nature—or the child. There’s not typically a blending,” Todd says. “At Launch, parents can take their child there or have a birthday party there, but they can have a good time hanging out at the restaurant, having a beer or pizza, or going bowling with their kids. We create an environment that’s unique.”

It’s that unique vision that Launch is counting on to attract multi-unit franchisees as it expands its footprint.

“There are a handful of core benefits to going the multi-unit direction,” Todd says. “First and foremost, it’s a lot more simple to roll out operational and marketing programs to fewer owners. If you have 100 locations owned by 20 owners, that’s 20 phone calls or meetings to implement that strategy versus 100 locations with 100 owners. With fewer owners, you can be faster to market with certain programs, and that will allow for more consistent customer experiences.”

For franchisors, there’s another benefit to attracting potential owners who want to open multiple locations. “Typically, you’re going to structure it to where you have agreed-upon development schedules,” he says. “Looking into the future, you predictably know how many units you’re going to open up each year. And with that predictability, there’s faster growth.”

Faster growth doesn’t mean hasty growth. Launch is careful and thorough in the way it evaluates potential owners, Todd says.

Like other brands, the company seeks multi-unit operators with several key qualities: financial stability, operational skills, leadership ability, and strategic vision. The brand doesn’t offer perks to sign on with Launch. “We believe our concept is compelling on its own,” Todd says.

On the flip side, multi-unit operators are looking for brands that have a stellar reputation among their franchisees, trusted leadership, good system-wide performance, and plenty of growth potential.

“When you’re working with someone to become a franchisee for one unit or for multiple units, you want to understand their history and track record just as they are evaluating Launch’s history and track record,” Todd says. “We’re going to look at their financial wherewithal not just to open a location, but to make sure they have capital reserves, multiple streams of income, and that they are in a strong financial position.”

All candidates go through a meticulous interview process. “I personally want to hear about their history with managing employees and creating culture as well as how they believe Launch will fit into their portfolio or how growing more locations will fit in,” Todd says. That includes “changes they’ll have to make to their business or to their lives. Because, right now, we all use our whole week, all of our hours. If you’re going to add something on, typically something needs to go. Whether you do that by empowering employees, creating systems, or delegating, there needs to be a plan for that.”

Todd likes to remind potential franchisees that there’s no hurry. “We believe in going slow,” he says. “Take your time, build it out correctly, find the right location. You don’t want to rush for sure.”

Advantages of teamwork

Over two decades, Walk-On’s Sports Bistreaux has grown from one restaurant next to Louisiana State University’s Tiger Stadium in Baton Rouge to 80 units primarily in the Southeast. The brand is still in growth mode. The goal is to increase the sports bar franchise’s number of units to more than 300 in the next five years, says Chief Development Officer Jennifer Striepling.

Walk-On’s believes its food sets it apart from the competition. Whereas consumers can watch a game anywhere, they can’t get food made from scratch at any sports bar, Striepling says. That attracts customers and franchisees.

“Food is the big driver for us—that from-scratch flavor profile with a touch of Louisiana,” she says. “Then there’s the family-friendly component. We’re not your typical sports bar.”

To expand its footprint, Walk-On’s is working on increasing brand awareness to spark interest from potential franchisees interested in single units and multiple locations. The key is “putting restaurants in the right places,” Striepling says.

The brand’s aim is to fill out white space in the South while continuing to make inroads in other regions. Doing that might mean offering incentives to those interested in joining the brand. “It would depend on the deal structure, the territory, and the background of what they’re offering. It’s a tailored approach,” Striepling says.

Last year, a new CEO was brought in to shepherd the franchise. The first order of business for Chris Dawson was a listening tour to hear about existing franchisees’ experiences with the brand and to take in any suggestions. It was an important move because before a franchise can expand, it needs to make sure the people in its system are satisfied. Of course, potential multi-unit operators will be talking to current franchisees.

Striepling says Walk-On’s prides itself on providing franchisees with excellent support and resources. The brand is there to offer advice on every aspect of a franchisee’s journey, from “real estate all the way through to marketing, operations, training. Our level of support is unlike any other casual dining brand in the industry,” she says. “We are with that franchisee every day, every moment of the way. They know they can pick up the phone and say, ‘I need help. I need someone to come into this restaurant,’ or ‘I’m looking for some managers,’ or ‘I’m having challenges with this,’ and that level of support is throughout the organization in any facet of the business. They feel like they’re not alone. They’re truly part of the team.”

A 3% failure rate

Regardless of what segment of franchising multi-unit operators might be exploring, they are all interested in one thing: success.

When it comes to that, PuroClean has an ace in the hole: an outstanding 3% failure rate.

The brand specializes in water and fire damage restoration as well as mold remediation and biohazard clean-up. By the end of the year, it will have 500 locations open in the U.S. and Canada.

“We call ourselves the paramedics of property damage,” says Vice President of Franchise Development Tim Courtney. Franchise operators “go in to save the day and put the property back to its preloss condition. It’s a feel-good business.”

Until five years ago, all of its franchisees were single-unit operators. Now, “we’re starting to see our fair share of multi-unit franchise owners and multi-brand franchise owners looking at this opportunity as a diversification play in their business,” Courtney says.

What’s the attraction for multi-unit operators? “It’s a recession-resistant business, which is driving a lot of interest,” he explains. “If gas goes to $20 a gallon, you might pull back on getting that massage or getting your nails done or eating out. But if you have water damage to your home—you have a mortgage—you have to fix it. Fire damage? You have to fix it.”

As PuroClean has worked its way up to becoming one of North America’s largest property restoration franchises, franchise operators have seen average annual gross sales exceed $1 million. 

The brand’s goal is to open 80 new units a year. “Out of those 80 units that we shoot for, 12 to 18 are expansions, additional territories taken on by existing owners. Also, we probably do a handful of resales. We’re a 25-year-old brand. We do have an aging franchise community that’s exiting the business,” he says, “and they’re transitioning those franchises to new owners or existing franchisees.”

Most new franchisee candidates aren’t often looking for more than one territory. However, so far this year, eight existing owners have added territories. Those multi-unit operators are especially highly valued by PuroClean.

“You’re growing with somebody who’s already experienced at the brand,” Courtney says. “The ramp-up time on a new territory is drastically cut short. For the owners themselves, there’s a big advantage too. Let’s say their territories are contiguous, meaning that they can all fit together like a puzzle piece. They have the ability to centralize their own services. You can pretty much run almost like a hub and spoke. You can set yourself up with an administrative location. You can have one centralized warehouse location. You might have a few sub-locations just based on how big those territories are, so you can quickly respond to water damage incidents or emergency services.”

When those owners are congratulated at brand conventions on their expansions, it can spark the interest of other existing franchisees, he says. Operators who ring up more than $1 million in mitigation revenue qualify for 50% off franchise fees for a second location and reduced royalty fees for the first three years.

“What better compliment does a franchisor have than when franchise owners want to buy more of what you’re offering?” Courtney says.

Fertile soil for growth

The work of enticing multi-unit franchisees begins long before any kind of formal inquiry, says Jennifer Durham of Hand & Stone Massage and Facial Spa.

It starts with making sure current franchisees feel satisfied and supported, which encourages them to open more spas or to refer other potential candidates. It continues when customers feel they’ve had a good experience, which sometimes encourages them to purchase their own location. “That is a really rich, fertile spot for us to pursue potential owners,” says Durham, the brand’s chief development officer.

In the 20 years since the brand started, the number of franchise units has soared to 550 in the U.S. and 60 in other countries. In the pipeline right now are 90 new locations, 60% of which are owned by people who are already franchisees in the brand.

With the health and wellness industry continuing to explode, the franchise is seeking to expand its reach even more. “We have more than 1,300 available trade areas in the U.S. and Canada, so there’s plenty of room to grow,” Durham says. “We think that we can easily approach about 2,000 locations.”

Multi-unit operators gravitate to Hand & Stone for many reasons. One of those is “our average unit volume for our locations is about $1.4 million, and our competitors are at $1 million or below,” she says. “We really stand apart because we generate more revenue per location than our counterparts.”

The brand also offers a discount on franchise fees for those buying two or more locations. But the franchisor is careful in its evaluation of who can take on such a load.

“From a financial perspective, we do assess the capacity for someone who’s interested in multi-unit ownership,” including liquidity and net worth, Durham says. “We also look at their experience and what they bring. It’s always better to crawl before you walk and to walk before you run. We want to make sure that we’re setting them up for success.”

Careful growth

Right at Home will celebrate its 30th anniversary next year. The franchise provides in-home care and assistance for seniors and adults with disabilities.

Roughly 75% of Right at Home’s franchisees own more than one territory. But they aren’t allowed to buy in bulk. Two territories are the most that can be purchased at one time. If the person meets Right at Home’s qualifications for acquiring two territories at the same time, the brand offers a 25% discount on the second territory’s franchise fee.

“Existing franchise owners go through a very formal expansion approval process because we want to make sure that their current business is moving right along before we move on to expanding and purchasing another territory,” says Jen Chaney, vice president for franchise development.

Sometimes, a franchisee’s current operation might show the person isn’t ready to take on more, and the application is denied regardless of financial ability.

“Our recruitment is really just for a single unit right out of the gate. From time to time, we do get very strong candidates who are in a wonderful position to purchase two territories instead of one,” she says. But prospective franchisees “go through a special review before they get approved to purchase two territories.”

That review includes a close examination of their leadership and management experience as well as a determination of how well capitalized they are and their passion for caring for seniors.

The priority is safeguarding the quality of care offered by Right at Home, Chaney says. “That’s always going to be top of mind,” she says. “At the end of the day, what is most important is that our franchisees and caregivers are providing the absolute best-in-class care that Right at Home is known for, making sure it’s the best that it possibly can be.”

The Benefits of Multi-Unit Franchisees

Whether franchise brands have proven existing franchisees itching to grow or new multi-unit franchisees looking to expand into new brands, markets, and territories, multi-unit franchising is a hot commodity these days. There are, of course, exceptions, but multi-unit operators can offer numerous benefits to franchise brands and their growth strategies:

• Reduced risk. Existing franchisees who are successful have a proven track record, lowering the risk of failure for the brand.
• Consistent brand execution. Existing franchisees already understand the brand standards and how to implement them effectively as they seek to add locations or territories.
• Cultural fit. Existing franchisees already share the brand’s values and passion. That means a smooth business relationship between franchisor and a growing franchisee.
• Less training and support. Existing franchisees are already trained and have established successful business practices, requiring less ongoing support than new franchisees.
• Infrastructure. Multi-unit operators typically have streamlined operational processes in place, allowing them to easily add brands/units and ramp up quickly.
• Fewer operational issues. Multi-unit franchisees generally understand every facet of business operations, reducing start-up problems and bumps along the way.
• Lower costs. Multi-unit franchisees generally require fewer resources and less attention from the brand than new franchisees. This can easily result in reduced operational, marketing, and training costs for the brand.
• Access to capital. Banks are more likely to lend to multi-unit franchisees with proven track records of success than to someone new to franchising.