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Expanding Your Franchise Ownership Might Be Easier than You Think

If you’re considering expanding from a single franchise unit to multiple units, you’re making a smart move. And it may be easier than you think. Here’s what you should know about moving to MCO (Multiple Center Operator) status.

First, you’ll find that your second and subsequent units may cost less than your first. Franchisors offer fee discounts to successful owners for multiple unit purchases. If you’re interested in buying a unit currently owned by someone else, franchisors often provide discounts on transfer fees as well.

Franchisors encourage successful owners who want to buy units within the brand because they can scale services and use fewer resources to serve fewer owners. They would prefer to have a smaller group of experienced and successful owners in a given territory; they present less risk than new, first-time buyers. They also require less time to vet and limited time spent in training.

Franchisors also tend to speed up the approval process for these buyers; they already have a profile and track record to refer to. They may even offer units from another of their brand family, meaning that you can expand your business and diversify without giving up multi-unit status.

Lenders also look favorably on owners considering multiple units; they may offer more favorable terms – an important consideration when interest rates are on the rise and money is tightening up.

Here’s some advice if you aspire to own multiple units. If you’re new to the business, it’s probably a good idea to wait a couple of years before applying to buy another unit. That gives you and the franchisor enough data to be confident you’ll be able to succeed. Lenders tell us they prefer to lend to owners who have stabilized their current business and aren’t trying to expand too quickly.

Aaron DiGregorio has been with Live Oak Bank in Wilmington, NC, since 2014. Live Oak specializes in helping franchise owners scale up to multi-unit ownership. He says owners with a proven record of success present less risk for lenders, so they can offer more favorable terms. “Cash is king,” says DiGregorio. “We are lending based on an owner’s cash flow. We make sure the owner has the resources to expand – and to survive when the unexpected happens.”

You’ll also need to make sure you’re in good standing with your franchisor. Most franchises schedule regular meetings or site visits to ensure owners adhere to company standards. If your franchisor has pointed out issues, they’ll need to be fixed; the brand is unlikely to offer more units to an owner who is not meeting sales goals or maintaining the brand expectations.

Both franchisors and lenders want to make sure you have a solid plan in place for managing several units. If you’re considering geographically distant units, you’ll need to prove that you have resources (human and financial) to manage from afar. What will you do if no one shows up for their shift in a location that’s 500 miles away?

Owning more than one unit helps diversify your business; if one unit isn’t performing, you’ll be able to rely on the stronger location(s) for cash flow while you work on solutions for the underperforming unit. You’ll also achieve economies of scale with marketing and other costs. More than half of franchisees are multi-unit operators for good reason. Maybe this is your year to join them.


About Franchise Clearly®
Franchise Clearly® specializes in reselling franchise businesses. Working with owners, they work through a defined proprietary process that finds highly qualified buyers and guides them quickly to the closing table. Their innovative team approach makes for a seamless process that nets the highest offer and the best terms possible for the seller.

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