Single/Multiple Unit Franchising/Regional Development/Master Franchising – 
What is this all about? 
Some Advantages & Disadvantages

4
November
2014
Franchise Basics

When investigating franchises many people think in terms of opening only one unit or a one territory service concept. Many don’t know that options exist in looking at more than one unit/territory. Also, becoming a Regional Developer or Master Franchisee is also an option for those with more investment capital and the desire and vision to see the “big picture”.

So, a quick primer on these options, what they mean, some pros and cons . . .

 

SINGLE UNIT FRANCHISE

A franchisor awards a franchise to develop a single unit. If it’s a retail concept (a brick and mortar, destination location, customers come to you), you open one unit only. For home based service concepts, you have a defined territory and usually can’t expand outside that territory, unless you buy more territory.

PROS

  • Lowest cost entry into franchising.
  • If a single unit meets your goals: income, lifestyle, quality of life, etc., you’ve found a great business!
  • Options exist to maximize flexibility – Owner can be hands on, absentee or semi-absentee.

CONS

  • Maximum sales are capped; you can expand just so far. If this meets your income needs, great! If not, you’re stuck.
  • If you want to expand later, neighboring territories may be sold.
  • Wealth creation may be limited and overall financial objectives may not be able to be met.

 

MULTI-UNIT FRANCHISE

A franchisor awards the rights to develop multiple units/territories on a development schedule agreed to by both parties.

PROS

  • Single unit income is multiplied to allow you to achieve the income potential you want.
  • You have a growth plan that meets your goals and the territory you need for expansion is secure.
  • Sizable discounts for multi-unit development make this an attractive offer.

CONS

  • Increased cost upfront to secure the territory you want.
  • Requires broad minded management approach – not for everyone.

 

REGIONAL DEVELOPER/MASTER

Some franchise systems elect to grow by having regional representatives develop the market for them.

Entrepreneurs who have the financial strength, the desire to develop a larger territory, see the big picture, and have the skill sets to coach and mentor others, like this model. It’s not a higher calling, just a different business model. Regional developers share in the initial and ongoing royalty fees with the franchisor. They bring new franchisees into the program; provide some of the initial training and ongoing support, perhaps provide regional marketing/advertising; they drive the market on a bigger scale. This could be a number of counties, a whole state, or multiple states.

PROS

  • For the big player, this model allows for the creation of significant wealth.
  • Small staff needed to run this type of operation.
  • The Developer is removed from the day to day operations.
  • An ongoing revenue stream is created.
  • Risk is spread among many franchisees.

CONS

  • Expensive, these licenses typically start at $100,000 to $150,000 and go up from there.
  • Not a quick return on investment, income and wealth build slowly, like an annuity.
  • Exit strategy is a bit harder to implement and can be much slower to effect because of the potentially higher return and resultax higher price.

Bob Johnson
FranChoice Newsletter

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