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Thinking about expanding via multi-unit franchising? If executed correctly, this strategy can provide numerous benefits for entrepreneurs.

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By Juan Cruz
 
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The franchise sector’s growth outpaced the rest of the economy in 2016 and is set to continue down this path in 2017, according to a report from the International Franchise Association. As potential franchise owners ponder their options and investments for 2017, considering multi-unit franchising — whether exploring franchising for the first time or expanding a current portfolio to multiple units or brands — this strategy allows owners to increase their focus on a particular brand.
 
Recent years have shown the trend of multi-unit franchising increasing, as it becomes more appealing to both franchisors and franchisees. According to FRANdata, more than 50 percent of all franchise units are now operated by multi-unit operators.  
 
Our group began franchising more than a decade ago, beginning with Applebee’s restaurants in Mexico. In recent years, we expanded our portfolio to include Johnny Rockets and MidiCi The Neapolitan Pizza Company. As we grew in both the number of restaurants and the number of brands, we learned key lessons along the way on how better to operate as a multi-unit franchisee. 

Top Benefits of Multi-Unit Expansion

For those who may be considering the world of multi-unit franchising, here are some top benefits. 
  • Combined Resources: One of the main reasons franchisees generally consider a multi-unit opportunity is the possibility for economies of scale as it relates to purchasing goods, services and even human capital. Purchasing goods or services in bulk usually offers the opportunity for a volume discount. When it comes to employees, skills and assets can be shared among locations or even the main office, especially as it relates to accounting or human resources. Developing a solid team that can grow within your organization can be challenging, but multi-unit franchisees see those benefits when strategic growth is executed correctly. For example, developing a talented restaurant manager that can assist with opening and training additional locations is key and can take some of the workload off the owner.
  • Market Presence: We own more than 15 Applebee’s restaurants in Mexico and are in the process of developing Johnny Rockets in Texas. Working with well-established brands that are recognized by a global audience positively impacts our local business, but it is also beneficial that we operate multiple restaurants under each brand in the same market. Each brand has a stronger presence in its respective area, which increases the chance that our potential customers will see and think of us more often than a competitor. In addition, based on the nature of our markets, we feel strongly that community involvement is key to success and having a stronger market presence allows us to do that from both the resource and logistical perspectives.
  • Repeatable Best Practices: Opening the first unit of any franchise is a learning process — unexpected issues arise and adjustments must be made to reduce any delay in opening or potential issues. However, once the first location is opened, the second, third, and more locations are easier, as you have learned from your mistakes and know what conflicts or issues to anticipate. As a multi-unit owner, you can develop your own playbook for success, for everything from real estate and purchasing to marketing and finance.
  • Efficient Marketing: Marketing is key to a successful franchise operation and additional benefits come from operating multiple locations. The money spent on a single advertisement can benefit multiple locations within the same media markey. The audience ends up selecting the location that is closest to them, and when all the market locations are under your organization, you benefit from all the customers that the advertisement drives. In addition, your group can creatively test various marketing campaigns without running large financial risks. For example, you can test a reduced price or limited-time-offer menu item at one location to see how it performs, before rolling it out to all locations.
  • Greatness in Numbers: As your organization grows in numbers, you gain more negotiating leverage with both vendors and even your parent company. Many franchisors will work closely with some of their larger ownership groups to offer tailored campaigns or strategies that benefit them across their stores, as they know their markets might differ from others. From a vendor standpoint, you have more clout when it comes to purchasing products and services, as you are often buying in bulk for multiple locations. 

Challenges are Manageable

Of course, there are challenges that come with operating multiple franchise units. One of the most important challenges we face is keeping up with the high standards that we and the brand set for ourselves. Continuing to deliver high quality meals, services and experiences to all guests can become increasingly challenging as we grow. The more units you are operating, the more staff you are managing and the more customers you are serving, the greater the chance for mistakes to happen. Instilling commitment to quality and service, especially in the restaurant franchise industry, is incredibly important to ensure your locations and the brand succeeds in your markets. 
 
In addition, as you become busier, you are not able to be on-site every day at each restaurant or operation. You must work to build a team that you can rely and depend on, knowing that they share the same values as you and the brand. We enjoy being closely involved with each operation but have learned that we must maximize our talent and allow them to focus on the day-to-day tasks while we focus on profitability and efficiency in the operations.   
 
Overall, operating multiple units with multiple brands is an exciting career for our family and our organization. It allows my wife and me to provide for our family, while also giving back to the communities where we grew up, offering jobs to families that live there. We have taken on exciting challenges, such as opening one of the first Drive-Thru Johnny Rockets restaurants in the country, which was a leap for the brand, but is serving us well and we are looking to expand down that path. 
 
If you are considering expanding via multi-unit franchising, certainly weigh the pros and cons, specifically relating to the brands you are considering. If executed correctly, multi-unit franchising can provide numerous benefits. 
 
Juan Cruz and his wife Paulina Zaragoza own the Cruzar Group, which owns three Johnny Rockets, along with 20 Applebee’s in northwest Mexico.

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