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Owning and operating multiple franchise outlets is called multiple-unit or ‘multi unit’ franchising. Multi-unit franchising is growing increasingly popular in New Zealand.Whether you can extend your business from a single unit, owner-operator model to a multi-unit franchising structure will depend on a range of factors. This article will outline some of the key questions you should consider when determining whether you should own multiple franchises.

Am I Capable of Running a Multi-Unit Franchise?

The critical thing to consider if you are contemplating becoming a multi-unit franchisee is your current circumstances. Before making that decision, you need to evaluate:

  • the success of your current franchise outlet; 
  • your management skills; and
  • your available resources.

Current Franchise

You will need to evaluate the performance of your current franchise location. You will not be able to get the consent from your franchisor to buy another outlet, nor will you reap the benefits of owning a multi unit franchise, if your current outlet is not operating successfully. 

It is crucial that your location is successful and scoring highly on reviews by your franchisor for a sustained period. Doing so will aid in getting your franchisor’s consent to purchasing another outlet. Furthermore, it means that you will have a profitable business model to pick up and place at your new location. 

Management

As your outlet ownership grows, your responsibilities as an owner will also change. 

When you run one or two franchise locations, it is common to do so under the owner-operator model. As a single unit franchisee, you both own the franchise and run it as a manager or staff member. However, as you surpass owning three franchise outlets, your required obligations change from ‘working in’ to ‘working on’ your business. This shift occurs because it is not viable to manage multiple units effectively. Instead, you must allocate this work to paid managers. As a multi unit franchisee, you will instead focus on whether your business as a whole is running effectively and efficiently.

If you wish to own multiple outlets, you will need to have management skills and expertise. You may wish to inquire into training courses or seek advice from successful multi-unit franchisees to develop these skills before purchasing another location.

Resources

Purchasing a new location of the franchise is a big financial step. It takes time and resources and should not be a decision you make lightly. You should ensure that you have the necessary financial resources before you buy another outlet. 

However, buying a second or third franchise location is a more economical way to grow and make more profits, in comparison to buying an entirely new business. You are able to:

  • share overhead costs between the franchise locations, such as a work phone or office space; 
  • reduce staffing issues by being able to swap members between the multiple locations; and
  • reduce the amount that each location has to allocate towards your salary, because you can now make an income from two or more locations. 

Is the Franchise Conducive to the Multi-Unit Franchising Structure?

You will also need to consider whether the franchise itself is capable of operating under a multi-unit operation. 

Some franchises are established and designed to operate solely under a single unit structure. The owner may have to also work in the business, or have a strong presence in the local community so that the franchise location can operate effectively.

In other instances, the franchise might not have the right systems or training to facilitate a multi-unit structure. If this is the case for your franchise, multi unit franchising may still be an option, but further down the line.

When evaluating whether your franchise is conducive to the multi-unit structure, it may be useful to see if other franchisees operate multiple outlets. If there are instances of successful multi-unit franchisees in your franchise, it may be viable for you to do the same.

Does the Franchisor Approve the Multi-Unit Franchising Structure?

Ultimately, you will not be able to own multiple franchises if you do not get your franchisor’s consent. It is crucial that you begin discussions with your franchisor when you start contemplating purchasing another franchise location. Doing so will provide you with the opportunity to:

  • implement any recommendations your franchisor has on how you can improve your business model or brand;
  • ask your franchisor for advice on issues of management and leadership; and
  • ensure that you are a top contender when your franchisor decides to sell a franchise location. 

Key Takeaways

Multi-unit franchising, when a franchisee owns more than one franchise location, can be an efficient and effective way to increase your business’ profitability. However, it may not be the right move for all franchisees. Before you consider purchasing a second location, ask yourself whether:

  • you are capable of running a multi unit franchise; 
  • the franchise is conducive to the multi unit structure; and 
  • you have the franchisor’s approval.

If you are interested in owning multiple franchise outlets in New Zealand, contact LegalVision’s franchising lawyers on 0800 005 570 or complete the form on this page.

FAQs

What is a franchise unit?

A franchise unit refers to a single location of a franchise.

Can you own more than one franchise?

It is legal to own more than one franchise location. However, whether this is possible and profitable will depend on: the success of your current franchise outlet; your management skills; your available resources; and whether the franchise is conducive to a multi-unit structure.

What is a multi-unit franchise?

A multi-unit franchise is when an individual owns and operates multiple franchise units.

How much does it cost to purchase a unit in the franchise?

The cost of a franchise unit will vary between franchise to franchise.

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