There are several different options you can consider when you are looking to expand your franchise footprint. You can choose to either own one or two units of multiple franchises or multiple units of one franchise.
There are distinct advantages and drawbacks that come with both of these scenarios. However, before you make a decision, it is imperative to confirm that the franchise you are currently a part of – as well as the franchises you wish to join – will permit you to own or operate businesses outside of its own. The standard agreement should contain this information.
It is imperative to arm yourself with information before proceeding with your expansion efforts. Read on to get our tips for building a franchise empire.
A significant number of franchisors offer incentives in exchange for franchisees who are willing to open multiple units within the franchise. The caveat is, typically they must be opened according to a previously agreed-upon schedule and must be located within a defined territory.
The benefits of doing so may include:
- Lower opening fees. The average fee you pay may be decided by the number of units you agree to open
- Lower royalty fees determined by one of two scenarios
- Total sales volume
- Support provided by the franchisee to their own units
- Granting of an exclusive territory for a pre-set period of time
- After the franchisee meets the initial development obligations, the initial fees charged for opening additional units in the territory during the term of the agreement are reduced
These incentives are not the only benefits offered by opening multiple units in one franchise. Other advantages include the following:
- As a bigger fish in a franchisor’s pond, you will have more influence with your fellow franchisees and more of a voice with the franchisor
- Noteworthy operating efficiencies including advertising costs, the potential for strong training infrastructure and internal management, lease and location considerations from landlords, shared labor between units, cost-of-goods benefits and internal distribution and warehousing and commissary costs
- Improve employee retention rates by giving them the opportunity to take on new and superior positions at your other locations
There are certain factors that will make opening one or two units in multiple franchises a smart decision for you. Ultimately, you should make sure they have at least one of the following common threads:
- Share similar attributes that work for all of the brands
- Operate in the same industry
- Are synergistic with each other
- Have alternating peak seasons
When you opt for multiple concepts, you are able to spread your risk, develop a diversified portfolio that yields a higher overall return and develop skills and knowledge in several different types of businesses.
Leveraging different concepts can gain favor with landlords, who know that multiple concepts can deliver efficiencies that single-concept tenants do not get. With this fact in mind, they may agree to subdivide a larger amount of space for your brands.
Franchise Financing For Your Expansion
Regardless of which route you take after reading our tips for building a franchise empire, ICA offers attractive non-bank/non-SBA (hedge fund) franchise financing options. We approve loans without requiring borrowers to put up personal collateral like SBA usually does.
We are able to take the equity you currently have in your existing stores and use it to collateralize your expansion into more stores. This means you may not have to pay out-of-pocket to expand.
We can approve loans for multiple-store scenarios, as well. For example, if another franchisee is offering a seven-store package, we may be able to get an approval for the entire scenario – enabling you to move quickly. Yet another advantage is, you control the build-out funds on new locations. The money does not go into an escrow account as it does with most SBA and bank financing. You get all of the money at closing! We offer fixed rates starting at 6.5% on seven to 10-year terms!
We provide the flexibility you need for your individual business situation with loans ranging between $100,000 to $10,000,000. Do you want to expand your portfolio with locations in multiple states? We make financing available in all 50 states and accept out-of-state borrowers.
Other lenders drag out the approval process, but we believe in expediting it quickly for your convenience. We can potentially grant full funding within 30 to 45 days once we have a full package.