Business Builders

If you're keen to own a chain of businesses, franchising can provide the solution through multiple franchised ownership

Franchisors divide the UK up into territories when they are planning out their national franchise expansion programme. However, as their franchise networks mature, many franchisors find that the most established and successful franchise owners that have completely developed their territory will still be looking for an opportunity to achieve growth. These ambitious business builders are not happy keeping their business ticking along earning a steady income, rather they are looking to increase the value of their asset. With all that established experience of successfully running a business under the franchisor's concept, it makes perfect sense in most cases to allow these individuals to take on multiple franchises and open additional locations or access additional territories of prospective customers.

If the franchise owner has been running the business hands-on, there will be a significant change in the way they will need to operate. For example, a retail franchise owner will not be able to manage both stores onsite simultaneously - the importance of having quality staff to takeover much of the hands-on role will be paramount here. Franchise owners planning to service multiple territories from a single hub office may still be able to retain practical control, but the increased workload will still require an increased reliance on the staff.

By increasing the size of the enterprise through opening multiple units/territories, the franchise owner will create a raft of efficiency savings and economies of scale. For example, staffing can become more efficient as the multiple units share sick coverage, provide more room for promotion incentives and enable a certain amount of specialisation. The franchisor may also be willing to pass on the cost savings of not having to provide initial training and launch support for the additional territories by granting the additional franchises for a lower franchise fee.

From a pure investment angle a multi-unit operation is more attractive because the risk is spread across more locations and the overall probability of success becomes greater. For instance, a local market shock that hits the performance of one store could be cancelled out by a sales boost in another store, keeping the bottom line of the overall business in the black.

While most franchisors will insist on a franchise owner making a success of one unit before considering granting additional unit licences, many will be amenable to reserving neighbouring territories for individuals expressing from the start an ambition to build a multi-unit business. As more UK franchise networks start to mature, the practice of multi-unit franchise ownership is growing, seeing an increase in the number of people becoming very wealthy through running a franchised business.

Reported by Stuart Anderson