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Advisory 2010-01-25

Banking on multi-concept franchise

Every franchisee aspires to expand and gain new heights. Multi-concept franchise helps a franchisee to flourish and gain sustainable growth in times of unpredictable economic conditions. Read on to unravel this interesting concept

By Abha Garyali Sub Editor

A multi-concept franchise involves buying the franchises of different brands at the same time. Franchisees with the desire to own a big empire out of their small outlet can opt for multi-concept franchising. The concept of a multi-unit franchise has been around for quite sometime. In this, a franchisee operates multiple stores of a solo brand. It has gained popularity with the rise of master franchisees and area developers. Today, we have more multi-unit franchisees than multi-concept franchisees. One of the reasons why multi-concept franchising is not popular is because a franchisor does want the franchisee to market other brands with that of his own brand as he feels the franchisee may not pay due attention to his brand. This can cause a big hurdle in opting for multi-concept franchising. Nevertheless, multi-concept franchising can bring in a lot of profits for franchisees, if they can cope with the pressures of managing different brands and businesses. Not all franchisees are capable of taking such a pressure, but, for those who can, it can work wonders for the franchise business. An over-all view of this up-coming concept has been provided for all interested franchisees.

Multi-concept franchise

A multi-concept franchise offers franchisees the opportunity to learn business skills from one brand and improve his performances in the other brand as well. This leads to increase in the over-all profitability of the business. This concept works best under the following considerations:

  • Similar category: Multi-concept franchise proves more profitable if all your brands fall under the same category. A multi-concept franchisee may not be able to cope with various demands of the business. It is best to invest in brands related to a similar concept like food and apparel etc.
  • Unity in diversity: The franchisee can opt for taking variety in one category. Suppose, as an aspiring franchisee you are interested in the F&B industry. You can get the franchisee of different brands under the food category. You can run outlets of Indian and Chinese cuisines and also invest in kiosks as these are easier to manage.
  • Seasonality in brands: A multi-concept franchisee tries to have different seasonality under various brands to have cash inflow throughout the year.

Let us now have a look at some of the benefits of being a multi-concept franchisee:

  • Suitable for all economic climates: All businesses hit rough times. During the recession, fine-diner’s were the worst affected while fast-foods and kiosks did steady business. Therefore, operating brands in several market formats simultaneously can help cope with an uncertain economy.
  • Steady cash-flow: If a certain product does not sell well at a particular time period, you can suffice with the presence of other brands and products. Suppose a franchisee runs outlets of both ice-creams and coffee, he will undoubtedly earn continuous profits in summers as well as winters. His coffee outlet would serve well in winters while ice-creams in summers.
  • Co-branding: Locating two or more brands in a single location also boost profits. For example, having an ice-cream outlet next to a fine-diner or a fast food outlet will certainly add to the sales. Moreover, employees can be shifted from one brand to the other to meet changing customer flow.
  • Hiring and retaining staff: With two or more brands, a franchisee can offer employees cross-training, flexibility, promotions, and career growth and skill up gradation. This strategy helps attracting and retaining best employees.
  • Boosting your spirit: An entrepreneur boosts his spirit with the excitement of starting something new. Moreover, the satisfaction of expanding your ‘empire’ can be an irresistible option for many.

There are many other advantages but there are a few limitations as well. Many franchisees get into multi-concept franchising without realising the amount of hard work needed. Besides hard work and added pressure, the franchisee also has to raise a lot of capital for the franchise fee, renting and maintaining outlets with satisfactory infrastructure. Buying the required merchandise for your outlets can also increase the amount of capital needed. An added strain to all this can be the regular royalties paid to all your franchisors to run the outlets. This can be cumbersome for some franchisees.

A word of caution

In the urgency to expand the business, never forget to consult a good franchise attorney who can assist you to understand the clauses in the franchise agreement. Franchisees can court trouble if they get into multi-concept franchising without maintaining agreements with all the franchisors. Keeping all the considerations and short comings in mind, a franchisee can certainly enter into multi-concept franchise, as this is surely a profitable concept to bank upon.

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