If One Is Good, Is Four Great?

Posted on May 16, 2011 by Farrah Kennedy

Whoa you say, I’m overwhelmed at the prospect of starting one business, you want me to consider more? Well, that depends… Mainly it depends on you and what you really want from your business. And to a lesser extent where your strengths lie should play a part in your decision.

Single Unit – probably exactly what you think it is. You own one Taco Bell or one Service Master or one Liberty Tax Franchise. You put your heart and soul into this one store and are probably a very hands-on owner-operator. Most people start out as a single-unit operator, so I will detail the pros and cons below.

Pros of Single Unit

• Less money to get started, therefore less risk
• Usually a labor of love and therefore may be more enjoyable
• Smaller business tend to have better customer service – largely because you are onsite most of the time ensuring this superb service and in today’s world, service can make or break a business
• You need less high end management experience – most of your staff will be managed directly by you, so you don’t have to have mad skills to manage managers and employees you never see much less know, etc

Cons of Single Unit

• Your ultimate earning potential is limited to the success of the one store and no matter how great the location, service etc, one location can only make so much profit
• Your own brand could open a franchise close to yours and become your competitor. As a single unit, you only protect a small area of real estate. Multi-Units or Area Developers can secure their areas better
• When you contract to open multiple units at the same time, you can save up to 75% off royalties for the consecutive stores
• You have less bargaining power when buying supplies or negotiating leases etc if you only have one shop

Multi Unit – this is where when you sign on for your franchise, you agree to open at least 2 units … sometime at the same time and sometimes you get one successful and then start the next one(s). Some franchises are almost always sold as Multi Units such as Schlotzsky’s Franchises or Dominoes Pizza Franchises.

And if you weren’t confused enough, there is also…

Area Developer - This is similar to a multi-unit operation except you purchase the rights to open your franchises in a very specific area and therefore guarantee the only competition in town will be you! There is usually a schedule to which you must adhere for when and where you will open your consecutive franchises.

Master Franchise – this is where you are like \"mini franchisor\". You acquire the rights to actually sell and operate franchises within a certain region and you collect a portion of the fees and royalties from your sales. This is the rarest form of franchise sales.

About Farrah Kennedy Farrah Kennedy is the General Manager at Franchise Gator where she oversees all aspects of the business including P&L and strategic objectives and growth. Farrah has been with Gator since almost the beginning – she was the first employee in October 2003. However Farrah began her career in lead gen in 1997 with NewHomesDirect.com, a research site for potential new home owners where she was the Director of Operations for 5 years.