It’s no secret multi-unit ownership is a growing trend within the franchise industry, particularly in the restaurant segment. Multi-unit franchisees now own 76.5 percent of franchised restaurants, according to research from FranData cited by Entrepreneur Magazine.
A subset within the multi-unit ownership arena that is rapidly gaining ground is multi-brand ownership. More and more franchisees are expanding their portfolios by looking to other franchise brands that complement their existing concepts. The benefits of multi-unit ownership within a single franchise brand are well-known to franchisees and franchisors alike, but there are several key advantages to cross-brand franchising as well.
Safeguard Against Single-Market Downturn
One of the biggest reasons a multi-unit franchisee will venture out into multi-brand ownership is protection against single-market downturn. By diversifying your portfolio with brands from multiple verticals, you spread any potential risk among the different locations and brands.
Owning businesses in multiple industries will provide a cushion against the volatility in an individual market. If one market begins to trend downward, you have the security and cash flow of franchise units within a different vertical to offset the shift.
Familiarity with Customer Profile
A key reason many franchisees prefer to be single-unit owners before expansion is because they need to take the time to become familiar with all the aspects of their business. Understandably, they are apprehensive to open multiple franchises until they have had success with one. After they have become comfortable owning and operating one franchise, they have the confidence to open others. The same is true for expanding from one brand to another. Having an understanding of the customer profile and other business components is a significant advantage for someone entering a new segment.
Starting a franchise with a complementary brand means you will be targeting the same demographic, but serving a different need. For example, a franchisee operating a gym or fitness studio already knows their target demographic – people who value their health and wellness. This type of consumer ultimately has needs outside of a gym membership, needs that can be filled by a brand with a similar guiding mission and complementary product or service. Opening a health and wellness-oriented concept like Smoothie King is a natural match for this niche group – a demographic the franchisee already knows how to market to.
At the same time, the franchisee familiar with their target consumer will also have an existing customer base they can pull from. By opening a complementary brand, the franchisee can leverage their existing consumers to kick start their new business instead of starting from scratch.
How to Expand with Complementary Brands
Expanding with complementary brands is a great way to grow your portfolio. Like any business decision, you need to research extensively before choosing which brands would fit best with your existing concept/s. The brands should be mutually-beneficial to maximize your investment, but predicting a successful complement to your existing portfolio can be difficult. Here are some questions to ask yourself when looking at potential complementary brands:
- What is my current customer profile?
- Would this brand be appealing to my current customers?
- Is this brand a competitor of my existing concept?
- Does this brand have available locations in my territory?
- How will this brand benefit my existing concept and vice versa?
- How can I cross-promote these brands?
When you have a solid concept and established a level of comfort with your initial investment, expansion with a complementary brand can be a smart way to grow. Whether you’re expanding within a single franchise system or looking for complementary brands, there are plenty of ways you can build on your success as a multi-unit, multi-brand owner.