In franchising, there have historically been two general types of franchisees: single-unit and multi-unit operators. Single-unit franchise ownership is much different from multi-unit franchise ownership. While both types of ownership have similarities, the two differ in many ways. Both have the right to use the franchisor’s trademarks and proprietary information, but they have very different goals and priorities. Therefore, it is important to fully understand the two types of opportunities.
Single-unit franchise ownership
Historically, single-unit franchising has been the backbone of the franchising industry. It is when the franchisor grants the franchisee the right to operate a single location. In general, franchisors understand that single-unit franchise owners operate at a slower growth rate than multi-unit franchisees, as most single-unit franchisees are first-time business owners and provide no guarantee about opening additional locations. Many single-unit owners mortgage their homes or retirement savings to fund their business, which means they are typically more motivated and emotionally invested in the business — failure is not an option. For this very reason, most single-unit franchisees own and operate the business themselves.
Multi-unit franchise ownership
Multi-unit franchisees are typically more seasoned business owners and have more capital to invest. A multi-unit agreement is when a franchisor grants the franchisee permission to operate more than one location: often in the same area or region. In most cases, multi-unit franchisees operate on a development schedule requiring them to open additional locations by a certain point in the future. Because of this, multi-unit operators tend to focus less on the day-to-day operation of their business and more on growth. While this type of operation requires a much steeper investment than single-unit ownership, it offers more stability and higher chances for success. More units mean increased sales volume and, if done strategically and correctly, a very solid business model created on an economy of scale. However, this typically requires a larger back-of-the-house operation than most single-unit operators can provide.
Which type of ownership is right for you?
Ultimately, both single-unit and multi-unit operators have their place in franchising and both types of operators require different skill sets to achieve success. This is important to keep in mind because a franchisee being successful in a single-unit operation does not necessarily mean they will do as well running multiple locations. Honesty about your individual capabilities will be key to determining which type of ownership is right for you.
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