Buying in Bulk
Whether good or bad, the surest way to quick growth--for you and your franchisor--is a multiunit deal.
"Total global domination." That was one new
franchisee's response when I asked about his future plans. At
the time, he hadn't even opened his first unit. In fact, I
figured by his flippant answer that he'd never actually worked
in a retail store. Yet this franchisee was on to something: The
desire to "mint money" by becoming a multiunit franchisee
is commonplace. Franchises are a lot like potato
chips—it's hard to have just one.
Adrienne Davis, 46, a four-store owner in the Gymboree chain, is
one franchisee who can't keep her hands out of the bag. As a
former Gymboree teacher, she was well-qualified for growth within
the children's activity franchise, and she learned she needed
multiple units to make money.
"Synergy and economies of scale are the most
compelling reason for multiple store ownership."
I myself have seen the prosperity that comes from developing
multiple stores. One couple who specialized in opening restaurants
in backwater towns that the company-owned chains wouldn't touch
had a Maserati, a Ferrari and a personal airplane to gain access to
their small empire.
Content Continues Below
As Davis has found, synergy and economies of scale are the most
compelling reasons for multiple store ownership. Stores owned by
the same franchisee can share supplies and transfer inventory, and
employees at one store can cover labor shortages at another. And
when your stores are not too far apart, you can split the cost of
local marketing materials. Eventually, with enough units, a
franchisee can create an entire administrative infrastructure and
delegate day-to-day operations to managers. Some franchisees have
hundreds of units in their personal networks.
Buyer's Market
Fortunately for you, franchisors want to sell multiunit
franchise licenses as much as franchisees want to buy them.
It's particularly good news if you buy into a relatively new
system. Early in the development of a franchise concept,
franchisors are hungry for multiunit developers, because it's
often difficult for the franchisor to distinguish itself in the
eyes of franchise buyers. Prospective buyers read franchise
directories like Entrepreneur's Franchise
500® to see what's hot. When a concept appears to be
stagnant, they stay away.
On the other hand, if prospective franchisees see rapid growth,
they assume they're missing out and investigate further.
Franchisors know this and love to sell multiunit deals early on.
That way, they benefit from the early growth and only have to train
one franchisee to get numerous locations open. Plus, franchisees
who can afford to develop multiple units have probably been
successful in business elsewhere and need less ongoing
assistance.
Page 1 |
2 