Selecting multi-concepts definitely allows you to spread your risk. You may also pick up intelligence and skills in one business that improves your performance in another. And you may realize a higher overall return with a diversified portfolio--one really hot concept can make up for a lack of performance elsewhere.
The multi-concept option may work best if the concepts you select either:
- operate within the same general industry, such as food, clothing or technology.
- create synergy, such as preschool and children's clothing, elder care and home services.
- are all service businesses or have other similar attributes that can be leveraged over the brands.
- have different peak seasons that can improve your internal cash flow
By leveraging concepts, you may be able to create efficiencies that can be used across brands, in areas of administrative support (payroll, etc.), warehouse and distribution.
Also, you may be able to maximize real estate. Landlords like to work with tenants that can deliver multiple concepts, because you can deliver efficiencies not possible from single-concept tenants. Consequently, they may be willing to subdivide larger space to fit your multiple brands.
If you decide on the multi-concept option, we suggest you read your agreements very carefully to make sure the franchisor allows you to operate other businesses during the term of your agreement. Make certain your definition of competing business and the franchisor's are the same. Work with a qualified franchise attorney who can coordinate and provide guidance on the differing requirements of the various franchisors. These types of transactions tend to become complicated.
One last piece of advice: Learning how to run any new business and managing the opening of that new business generally requires more time, effort, money and skills than anticipated. While your team may bring many talents and skills to the new business, getting one concept off the ground before you take on another concept is essential. Take your time and good luck.
Michael H. Seid is managing director of Michael H. Seid & Associates, a West Hartford, Connecticut- and Troy, Michigan-based management consulting firm specializing in the franchise industry. Seid co-wroteFranchising for Dummies(IDG Books) with Dave Thomas, the late founder of Wendy's, and serves on the International Franchise Association's Board of Directors.
Kay Marie Ainsley, managing director of Michael H. Seid & Associates, consults with companies on the appropriateness of franchising; assists franchisors with systems, manuals and training programs; and is a frequent speaker and author of numerous articles on franchising.