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Entrepreneurs Embrace Multiple Franchises

Take a closer look at the latest trend in franchising: the "mega-franchisee," who owns more than one franchise brand.

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First came the single-unit franchisee.

Then the big player, with 50 KFCs, who shattered the mom-and-pop stereotype of a franchise owner. Now the latest twist: entrepreneurs who own chicken joints, as well as taco, pizza and yogurt places. "We are seeing the emergence of the mega-franchisee," says Neil Simon, executive director of the National Franchise Council, an industry self-regulatory group based in Washington, D.C.

While restaurateurs have for a decade or so combined brands under one roof, under this new scenario, small or medium-size chains are pulling in franchisees who already are succeeding on a large scale with a completely different restaurant concept.

Of the 100 largest franchisees in 1998, 38 owned more than one concept, up 81% from 21 in 1996, according to the Restaurant Finance Monitor, Roseville, Minn.

So, chains like Taco John's International Inc., Cheyenne, Wyo., are turning to savvy operators like Simmonds Restaurant Management Inc., Omaha, Neb. In the last 23 years, Simmonds has opened or acquired 68 units of Diageo PLC's Burger King Corp. Simmonds President Paula Glissman says she hears from at least one chain a month seeking Simmonds' services. The company finally bit when Taco John's came calling.

Simmonds bought four existing Taco John's, and will open 15 more in Nebraska and Iowa. Simmonds has added a new manager to deal only with its Taco John's units, and will add more managers as it opens more Taco John's.

Says Ms. Glissman, "Burger King, of course, isn't excited about it, out of fear that it will take our focus away" from Burger King matters. It won't, Ms. Glissman assures, saying Simmonds has three more Burger Kings under construction and has agreed to open more.

A Burger King spokesman declined to comment specifically on Simmonds, but said the chain permits franchisees to branch out, as long as the new venture isn't burger-related.

Operators like Simmonds have more financing options, while single-unit owners often are at the mercy of their local bank. The franchisees use their existing back-office operations, and already know where to locate new restaurants. "It's a quicker and more liquid way to grow your business," says Michael DeMita, executive vice president at FMAC Diversified Finance Group, which puts together plans for mega-franchisees.

The trend is being shaped by the strong economy. In addition to easier access to capital, the big players can alleviate franchisers' anguish of having to sell units one-by-one at a time when prospects are harder to find.

Running a business matters more than knowing an industry. When Blockbuster Inc., Dallas, restarted its franchising push last year, recruiters set up a booth at Restaurant Finance Monitor's trade show. The theme: It doesn't matter whether you know french fries or French films, we need your business skills.

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