(FS2) What About The Multiple Unit Franchisee?
Multiple unit agreements, also known as area development agreements, are franchise relationships that give the franchisee the ability to create multiple single unit locations in a certain area. This is because there is an agreement upfront of a certain number of stores that will be opened for that store. The contract will generally define the number of stores, the area and the time frame for the stores.
If you want to buy 10 franchises, then it is in your best interest to have a multiple unit agreement rather than purchasing them as single unit franchises. If you wait to purchase each of these franchises for sale as single unit there are a few things you risk including:
- You may not have your market to yourself as there may be other franchise owners within your market
- All the other franchises for your market may be sold before you are ready if you buy them as single unit franchises.
- Franchise owners that buy after you may take the prime locations you want.
If you want to take these risks out of the equation, then the best thing you can do is to start out with a multiple unit agreement rather than a single unit franchise. When you do it this way you will be able to open the 10 franchises you want in the time frame you agree upon with the franchisor and get the exclusive rights to your market.
You do want to make sure that you get market exclusivity with your franchise. This is because when people look for the brand of franchise you are purchasing in your area, you want to make sure that your franchises are the only ones they will find. Keep in mind that you will usually have to pay a fee to have the development rights and you will also have to sign a contract obligating you to open these 10 locations over the agreed upon time. Usually with this, there will be specific dates set for the individual locations.
The fee you will pay for the multiple unit agreement will differ depending on the franchise you go with. This is true with any franchise fee, even single unit franchise agreements. Here are a few factors that may come into play with the franchise fee:
- You may have to pay the initial franchise fee in full with each location
- The franchise fee may be reduced by the franchisor as part of the multiple unit agreement
- There may be a different franchise fee or fee structure for multiple unit agreements than with single unit franchises
- A percentage of your development fees may be applied to the initial franchise fee for each location.
- The biggest thing to remember is that each franchise deal is different. Make sure you have a lawyer look over the contract to make sure it is fair.
There are several benefits of multiple unit agreements for both the franchisee and the franchisor. The biggest advantage for franchisors is that this can help to reduce their costs. For one, the cost for selling franchises will be lower. Also, it will cost them less to serve the franchises when there are fewer franchisees. Along with this, the controlled growth that comes with a multiple unit agreement is a better form of growth than with single unit franchises. It even makes it easier to negotiate with suppliers and vendors.
Coordinating local advertising and marketing plans is easier when you have a multi unit franchise agreement. As a franchisee you will have more staff that can be sent to the different locations if needed to help out in the event that someone calls out or there is an emergency. If you plan to buy food franchises, then you can combine the prep aspect of this in one centrally located facility or kitchen. In many cases you will save on freight costs as well as costs for the supplies because you will not only be able to buy in bulk but can have it sent to one location.
You can also view more about single unit franchises.
