How many franchisees start with one store and then turn into Multiunit franchisees? What is the secret of their success? Read to know more.
If you running a franchise business, expansion plans should top your priority list. Multi unit Franchising has proved to be a boon for most of the people who have opted for it. Iit brings along great returns while strengthening strong business network pan India or the areas allotted. This franchising model somehow also promotes cluster network, increasing the brands presence in particular areas and regions.
The Multi-Unit Franchise is a form of franchising that has increased in popularity, frequency, and influence over the past few decades. Under this model the franchisor will often bring in operating principals to run each individual location.
While becoming a Multi-Unit Franchisee certainly requires a higher investment level, it also provides more stability and a higher expected rate of success, as the franchisee is not reliant on just one location to be successful.
How Apt is the Model?
The model is a prolific technique of franchising because if things work out then it will bring gains to both the franchisor and the franchisee creating a win-win situation for both.
Sharing his views on the Multi Unit franchising model, Rajesh Jain, CEO, Lacoste said,” In our field, multi unit franchising is working well. When a franchisee partner takes one door and there is an alignment, he is able to understand better about the brand’s requirement and the business requirement. In entering new doors, they just have to replicate the earlier models. This makes the future prediction easier because they have already operated on one or two doors earlier. The model is apt for both the brand and the franchisee perspective as it allows reasonable predictability.
“We follow a selective distribution network where every new door that is opened is chosen very carefully. With a lot of changes in the fashion business, franchisees need to have domain knowledge and also an ability to swap the merchandises in multiple stores. A multi network franchisee makes it happen more actively. Having only one unit makes it very difficult for the franchisees to understand the merchandise properly”, said Rajesh Jain.
Pros & Cons
This format has proved to be a boon with most of the people who have opted for it. It’s because it has tagged with it the advantage of providing opportunities for swift and proficient growth.
Operating a multi-unit franchise is easier to run as the franchisee is familiar with the system's operations, policies and procedures of the brand. A single store brings in the 100 per cent risk factor but with opening multiple units, would divide the risk factors as well as the returns among all the outlets. This way, if one outlet is not doing well, the deficit can be covered up by the other stores.
Rajesh was of the opinion that,” For any business, especially the retail chain, consistency is extremely important. Without subjecting any specific location, the customer should get the same experience for a brand like us. So, with a model like multi franchising, the franchisee already understands the brand’s requirement.”
Multi Uniit Franchising comes with disadvantages as well. Multi Unit Franchisees need to assess very carefully the quality, propensity to innovate and strength of the franchisor.
In the words of Rajesh Jain," A business downfall ends up affecting all the units of a franchise."
Vasant Kumar, on the other hand stated,” If a franchisee doesn’t invest in time then they are risking so many sources. As you become bigger, the investment also grows up.”
The Multi Franchising Journey
Sharing his views on cluster franchising, Vasanth Kumar, Executive Director, Max Retail India says: "We strongly follow cluster franchise network strategy for brand strengthening. For future expansion also we are looking at multi-unit franchisees pan-India.”
“We believe that a franchisee developing an assigned area can do a better job than a single unit franchisee. In Kerala, we have two master franchisees that are responsible for developing all the franchise network outlets across Kerala and we are satisfied with their performance”, said the Executive Director.
Rajesh Jain said,” Lacoste only operated company owned, company operated (CoCo) stores but we have recently opened up to the idea of franchising and have got a few multi-unit franchisees on-board. Going forward, our expansion will see a combination of CoCo and franchise stores in equal proportion and of the franchisee stores a significant number will be operated by multi-unit franchisees," said Jain adding that multiple units also help in de-risking the business.”
Vasant Kumar, on the other hand said, “As a franchisor, we are seeing the benefits in giving out multi unit franchisees which helps in better contribution to the business.”