Single Unit vs Multi-Unit Franchises: Which Is Better?

Introduction

In today’s blog, I’m going to go through the major differences between a single operator franchise and a multi unit franchise.

Single Unit Franchise

Someone might just have a single location for a variety of reasons. It might be the industry. So with, like, service brands like healthcare, real estate property management, commercial cleaning, it doesn’t really make sense to have a lot of locations. You can just have one office, and then your team’s more out in the field.

Another reason, you know, looking at food and beverage, it could just be for lifestyle reasons where there’s a sticky point between one location and five locations where if you have two, three, it’s generally the owner that’s working a lot and going between the different restaurants, as there might not be enough margin for an area manager. However, once you get to that fifth location, there’s enough margin for an area manager.

But going from one to five, there is that hurdle to cross. And a lot of people, for lifestyle reasons, and also capital reasons might just want to stick to one location.

Multi Unit Franchise

Now the multi unit franchise is going to be more like an executive where you’re generally managing 10 to 100-plus employees, and you’re going to have three or four levels of management in your business. You either have to be pretty rich, net worth well over a million dollars. Or be comfortable taking credit, taking loans.

Most franchisees will take advantage of the Small Business Administration 7(a) loan program. Or they might look to roll over their retirement funds. Especially if you’re gonna open up multiple locations, and you don’t already have millions of dollars of capital. So you got to be willing to take a higher risk than someone that might be open to just have one location. So you’re either comfortable taking credit and that risk that go with leveraging up your investment, or you gotta wait to reinvest the capital.

Now there are some exceptions with low-cost businesses like a cell phone or a technology repair business, where for $100,000 you can get up and operating, or some of these tutoring education franchises. But generally, retail products and services, food and beverage, it’s going to be over $300,000 to open up the business. So you’re going to have to wait to have the capital ready to invest or be comfortable taking out that SBA loan, or even rolling in some of your retirement savings.

Conclusion

So a single operator franchise, generally, it could be a first-time entrepreneur. More interested in flexibility lifestyle, or it could just be the industry doesn’t require having multiple locations. And the multi-unit operator is going to be more of an executive type. That generally has experience already with managing a large team of employees.