Most would-be franchise business owners can picture themselves owning a franchise that has several locations.
Owning multiple units of a specific franchise makes it possible to multiply earnings. For example, if you own only one unit of a Great Clips franchise, your revenue may not be enough to satisfy you—if you’re dreaming of total financial independence. That’s why most hair salon franchise owners are multi-unit owners. It’s not that you can’t make any money with a single location…not at all. It’s just that your financial goal may not be realized if you’re looking to grow something substantial.
There’s a reason that multi-unit franchise opportunities are attractive to former corporate executives; they’re used to making a lot of money, and they really don’t want to take a big hit if they decide to go the franchise ownership route.
There’s another reason why executive-types like the idea of owning a multi-unit franchise business; they can actually witness their growth, first-hand. That’s because, a multi-unit franchise contracts specify that franchisees are obligated to open a certain number of stores in a certain amount of time, and in a specific geographical area. In order to reserve that area, and the future units that they’re obligated to open, you’ll pay a either a portion of the franchise fee for each future unit that you’ve agreed to open, or the entire amount; it just depends on what the contract states.
For example, the initial franchise fee for a single unit franchise may be $35,000; if you sign a 3-store agreement, the fees for the 2nd and 3rd store may be discounted if you pay them in full, to let’s say $25,000 each. So, when you sign your 3-store agreement, you’ll write a check for only $85,000, total. Sometimes, the franchisor only requires a partial payment for your future stores; it depends on the franchisor. The bottom line is that you’re reserving a specific geographical area in which you agree to develop a certain number of franchises-and you must open them.