So you’ve built a successful small business with a franchise. You’re hitting your stride, and you’re ready to expand. Where do you go next? We think the answer franchises in multiple locations. Here are our top four reasons why multiple franchise ownership should be on your shortlist.
1) Spread your risk around
A diversified income base will reduce your risk. That’s pretty basic. For instance, if you run a restaurant and there’s a fire, then 100% of your income is out of the game. If you have five franchise outlets, then only 20% is out of the game.
Now some experts will argue that for this reason, it’s better to expand into additional franchises, e.g. own two McDonald’s and three KFCs.
But that isn’t always the case. While this will reduce your risk profile, we think the efficiencies you sacrifice in ordering, processes and simply knowing the systems means multiple locations of the same franchise is the way to go.
2) Seasons are easier to manage
Particularly with companies that have multiple brands, multiple locations can be a great way to manage seasonal highs and lows.
For instance, you might own a Burger King, which does well in winter and a Popeye’s, which does well in summer. They balance each other out through the year.
Alternatively, multiple locations give you the chance to expand into highly-seasonal, but lucrative locations like amusement parks, waterfronts and ski towns without worrying about undue risk.
3) Easier cash flow management
Just like seasons are easier to weather, month-to-month cash flow is easier to keep a hold of because each asset you need to buy or sales slump represents less of your overall financial picture.
For instance, if you need a new venting solution for 10 feet of cooking space, that might set you back $15,000.
With a single franchise, that cost could cause serious problems. But with two, you’re unlikely to run into undue stress.
What’s more, if sales decline in one location, you can usually offset those numbers by a spike in another until things stabilize, you drive more sales with marketing or you undertake some other initiative.
4) Daypart opportunities
For most franchises, dayparts can work in two ways.
First, you can reuse your physical space or assets during slow hours for higher-value activity (e.g. a nice restaurant renting themselves out as a co-working space during the day).
Second, reusing staff, suppliers and other assets across multiple locations. While the first is largely unaffected by multiple franchise ownership, the second can lead to some serious process and cost efficiencies:
- High-quality staff can get the hours they want across locations (as well as the advancement opportunities)
- Products like food, cleaning supplies and other consumables can be shared where the demand is highest
- Expanded opportunity to ‘test and learn’ new daypart initiatives
Summary
Once you’ve mastered one franchise, it’s a natural step to look at acquiring others. Talented franchise owners are of course in high demand, so a lot of alternatives are likely to present themselves. But for the right balance of risk management, easy cash flow, seasonal balancing and dayparting opportunities, we recommend doubling down on the franchise you know and love with multiple franchise locations.
Have you been considering expanding your franchise to multiple locations but you’re not sure where to start? Give us a call today and we can help!
