Brand
Diversity
The growing allure of
operating several concepts
Franchising continues to grow—not only in size, but in com- plexity—and in recent years, a huge part of that growth is attributable to multi-brand franchising. Makes sense. If following the system works for one suc-
cessful brand, it will most likely work in another, then another—if
you choose wisely. And if your unit economics are strong, more
profit will flow your way with each passing year and additional brand.
Diversification, a recommended strategy in designing an investment portfolio, is a big part of the thinking behind the growth in
multi-brand franchising. As savvy investors know, no matter how
good your ROI may be from a single holding, it’s not wise to put
all your eggs in one basket. And as multi-unit franchisees seek new
avenues for growth, an increasing number are adding second, third,
and fourth brands to their portfolios.
“There is a definite interest in growth through multi-concept
operations,” says Darrell Johnson, president of FRANdata. “It’s con-
tinuing to expand and grow, and we see the trend continuing upward.”
Franchise attorney Lane Fisher observes: “From a franchisor’s
perspective, multi-unit franchising provides opportunities for ac-
celerated growth; a vehicle to penetrate new markets; capitalize on
certain market efficiencies; reduce the training, opening, and opera-
tional assistance typically provided to single-unit franchisees; and is
a means to attract and reward productive franchisees.”
One dynamic propelling multi-brand growth is the combination
of 1) expansion-minded franchisors seeking multi-unit operators
successful with other brands with 2) successful multi-unit franchi-
sees evaluating new concepts to diversify their organization. This
alignment of interests has been accompanied by a rise in the number
of franchisors offering several concepts from under one corporate
umbrella—usually limited to a single industry segment (fast food
or home repair services, for example).
