Is it a great idea to buy multiple franchises

Multiple franchises: Should I buy a second franchise?

Multiple franchises do work, but I would not buy another franchise just because the first one is going well without careful planning.

I would buy a second or third franchise because the second one makes the whole business better. This can happen because of economies of scale and opportunity to grow based on known success of your first flagship.

As Franchise Accountants we often see that one franchise can sometimes become a well-paid job. You are managing staff, fixing problems, watching wages, dealing with customers and keeping everything moving.

Then you buy a second location. Suddenly you may have enough scale to employ a proper manager, share staff, streamline administration and start building a business that does not depend on you being there every day. That is where multiple franchise ownership gets interesting. But more stores do not automatically mean more wealth.

So I always want to know one thing when deciding to expand to multiple franchises !

*What does the business make after paying someone properly to do the owner’s job?

If the numbers only work because you are working 60 hours a week for free or low return, you may not have bought an investment. You may have just bought yourself another job with painful extras. There is no medal for owning five franchises if strategic it ends up a problem. I would rather see someone own two excellent, well-managed businesses than five average ones.

Having said that, it is commonly known that if you buy one Mc Donalds or KFC franchise you end up being offered to buy more. It’s hard to buy some franchises as they only want star performers in the franchise group of owners. Hence if you’re doing well with one then another might be on the cards.

Before you buy the next franchise, ask yourself!

Will this make me more money and give me more freedom — or will it just make me busier? Thinking about buying a second franchise take a strategic approach?

It can be a great move — but more stores do not always mean more money. The real benefit of owning two or three franchises can be scale. You may be able to employ a good manager, share staff between locations, streamline bookkeeping and payroll, and eventually get yourself out of the day-to-day running of the stores.

That is when it starts to become a proper business rather than just another job. You start sharing stock , staff and reaping the benefits of 2 or more businesses operating successfully in several locations.

But there is a catch. Another franchise also means another lease, more wages, more stock, more debt and another business that can go wrong. So before buying the next one, I would ask a very simple question:

Will this make me more money and give me more freedom — or will it just make me busier?

There is no point owning five franchises if they all need you there every day. Personally I would rather own two very good ones that run properly without me. The real test is whether the business still works when you have an ordinary year or an economic downturn.

Location and opportunity!

Location matters as well when you own more than one. Two stores half an hour to an hour away apart can be a really good combination. They maybe close enough to share staff and management, but hopefully far enough apart to have different customer bases. But you need to make sure the second store is not simply stealing sales from the first. There is no point paying good money to buy your own customers back.

One of my clients had a bedding store in west of Melbourne and another in the east. The two meant that it allowed each store to support customer enquiries. In this case the 2nd store had a bigger range of bed heads so when the other store received a customer enquiry around bedding furniture they could still satisfy the customer’s needs without losing the sale.

The decision to buy another franchise might be strategic or it might be economies of scale . Either way do your homework and think through your exit plan.

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