franchising aspects Nov, 19 2009

Multiplying profits with multi-units

Expansion of business through franchising is not limited to the franchisor alone, but also to the franchisees. Recently, the concept of multi-unit franchising is on the rise in India. Many single unit franchisees are taking this way towards expansion. Le

By Ramanjit Kaur
Feature Writer
Multiplying profits with multi-units

Multi-unit franchising is a concept of having more than one franchise outlet of a brand. If an existing franchisee runs a single outlet successfully and is looking for expansion, then one opts for multi-unit franchise. The franchisee does so by taking the rights from the franchisor to open outlets in other geographic locations. Franchisors also show willingness in offering the rights since the brand has already made a successful existence in the market, thus, solving the problem of the franchisors to search for more capable franchisees. Moreover, the franchisee also benefits as the franchisor might give the rights at a reduced franchise fee for the success owned. Dipti Taluja, Multi-Unit Franchisee, Madame said, “It is a wonderful feeling to be a multi-unit owner. Running a successful business with support of the franchisor and colleagues, gives you a sense of being independent. It adds to a sense of security and a trust on one’s own entrepreneurial skills.” After becoming a multi-unit owner the franchisee is less involved in the day-to-day operations of the unit. Instead he/she manages operations and decisions at the higher level. In this concept, the franchisees are not restricted in opening outlets in single city rather can expand in other cities also.

Is multi-unit franchising suitable for all franchisees? Despite the advantages of multi-unit franchising, the concept is not ideal for all the franchisees as it requires more investment of time, energy, and greater responsibility. So, one is suggested to opt for multi-unit, only when the aspirant has the required management skills, strategic potentials and financial resources to go for.

Benefits of multi-unit franchises

Some of the advantages of owning multi-unit franchises are:

  • Accelerates profitability: Owning multi-unit franchises hastens making profits, thereby, reducing the overall expenses. Multi-unit franchising decreases the per unit expenses as the franchisee can share the expenses with his/her multiple units. Thus, the franchisee can afford more staff, invest in training and marketing at the local level.
  • Cost-efficient marketing: Marketing in multi-unit franchising is highly cost-effective. Take for instance; if you own multiple outlets within a city, then you can make use of the local media to endorse your multi-unit franchises. Thus, saving money by purchasing the media place for a single advertisement rather than endorsing the outlets separately. Moreover, the savings can be utilised in buying more effective media like local radio or TV channel.
  • Raising profit margin: Being a franchisee of the multi-units, one can easily recognise the substantial savings in buying the supplies in bulk. It will save money and raise profit margins. Additionally, slower selling products can be shifted to high volume location, where the demands are higher.
  • Efficient and flexible staff: Multi-units are granted within a particular geographical area. Therefore, in case of employee shortage (absence or illness) at one outlet, the employees can be shifted to other franchised units to maintain the franchise operations effectively.
  • Saving time: For a franchisee of multi-units, there is no need to attend the franchisor training sessions for several times. As the franchisee has already concrete experience by way of a single unit franchise and has already following the proven business model, therefore, can spare time on developing his multi-units.
  • Managed by family: Another important benefit of having multi-unit franchise is that the whole family can be involved and share work. 

Hurdles on the way

In spite of merits of multi-unit franchise, there are few hurdles in this concept. To name a few:

Time allocation: With multi-units functioning simultaneously, the franchisee might face problem in devoting equal amount of time to its outlets. This could affect the business adversely. Thus, investment of time is one of the shot-falls in multi-unit concept.

Managerial problems: Having many outlets demands the franchisee to employ managers for the outlets. Hiring too many managers need a lot of investment. Not only that, as having managers to look after outlets is advantageous but at the same time they need to guided on a timely basis which could be problematic at times.

Maintaining success: The multi unit owner may not earn profits equally well in all his/her outlets. Therefore, the franchisee can face more of pressure from the franchisor to buck up the sales and services.

To conclude, it can be said that a number of today's franchisees are highly experienced and successful business professionals who are strategically building their own small franchise empires. If the franchisee has the desired determination and managerial skills, then multi-unit concept is a better way to expand one’s business enterprise.

Related: Target small cities for big benefits

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