Buying into a franchise is an excellent way to become a business owner. Franchises help entrepreneurs with investment capital tap into demand for a specific brand’s goods or services. They can bring a popular company to a local audience.
Once people are aware of the new franchise location, it may prove to be relatively profitable. The franchisee may want to consider expanding their franchise business by purchasing additional units. They essentially enter into a new agreement with the franchisor allowing them to establish one or more additional franchise locations.
They may do so within their current territory or by expanding their territory. There are numerous benefits that franchisees can derive from acquiring additional units during a franchise agreement. The three potential benefits below are among the most compelling for many franchisees.
Rapid expansion
Purchasing new franchise units is a very quick way to scale up the operations of an already successful franchise business and multiply profits. Provided that there is adequate demand in the local region for the goods or services that the franchise offers, each new location can be a source of revenue that can expand the company’s overall profitability and market reach. While rapid growth is often dangerous for new businesses, it may be more sustainable in a franchise scenario.
Optimizing talent retention
With a single franchise location, there are obvious limits to the career development of employees. The franchisee only needs one general manager and may only require the services of a few assistant managers or team leaders. They may hire the best and brightest, but those people may then start looking for job opportunities elsewhere when there aren’t open positions that allow for upward mobility within the franchise organization. The establishment of new locations can provide opportunities to talent already working at the original franchise location. The franchisee can retain their top talent and can also attract ambitious people who recognize the opportunity that comes from working with a franchisee who has multiple locations.
Sharing services and supplies
Maintaining adequate staffing and necessary supplies for a single franchise location can be challenging. When there are multiple locations in a specific region, the franchisee can potentially use the talent and resources of one franchise location to address issues at another facility. If equipment fails or a worker has a personal emergency, the resources of another location can help ensure that the affected franchise location continues operating without many issues. It can also be beneficial to cross-train between locations to ensure a well-educated and productive workforce.
Expanding a franchise operation by acquiring new units can be a smart choice for a successful franchisee. Franchisees often need help planning their expansions and negotiating favorable contract terms. Appropriate assistance when renewing or modifying franchise agreements can make a major difference for those invested in a franchise business who are seeking to expand.
NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.