Should You Open One or Multiple Beauty Franchise Locations?
Many franchisors, including those in the beauty sector, seek out franchisees who want to open three or more units. They do so because knowing how many units are opening allows them to better plan market support, advertising, etc. Multi-unit franchise developers are usually more sophisticated and better financed than single-unit operators, although experience isn’t always required due to the extensive training the franchisor provides; and because it’s easier to get fewer franchisees up and running than hundreds.
The reasons many beauty franchisee find multi-unit ownership beneficial are quite different.
Benefits of Multi-Unit Franchise Ownership
By owning multiple units of the same beauty franchise brand, you may be able to realize significant operating efficiencies, and other benefits, particularly if the units are located within the same market. These can include:
- running a single marketing program that benefits all locations
- sharing human resources and staff between locations
- if one location runs short on something, inventory can be taken from another location until the location in question gets a new shipment.
- sharing internal warehousing and distribution costs
- being able to do bulk purchasing
- improved operations due to the ability to establish a strong internal management team and training infrastructure
- being able to provide a career path for key employees, which can improve retention
- with more locations, you may have more influence on the franchisor and among fellow franchisees
- since you won’t be relying on one location for your success, you may enjoy more stability and a higher expected rate of success
- your business will likely be more attractive to buyers when you decide to sell it than if you owned a single unit
How to Become a Multi-Unit Franchise Owner
If you are interested in owning multiple units of a beauty franchise brand, many franchisors offer an area development agreement option. It entails the developer (you, the franchisee) committing to opening a specific number of beauty franchise units in a defined territory over a specified period of time. In exchange, the beauty franchisor agrees not to open a company-owned unit or allow any other franchisees to open a unit in the territory while your development agreement is active.
Typically, there is a franchise agreement between the franchisor and franchisee for each individual unit that is opened. If the agreed-upon schedule is not met by the franchisee, they can risk losing their rights to open any further locations under the agreement.
Franchisors often offer incentives to get franchisees to enter into an area development agreement. These may include:
- an exclusive territory for a defined period of time
- reduced opening fees - generally initial fees are reduced on a sliding scale based on number of units the franchisee commits to opening
- reduced royalty if the franchisee provides support to their own units and/or based on total sales volume
- the ability to open additional units within the territory during the term of the agreement with no or lowered initial fees once the initial development obligations are met
Higher Risk, Higher Reward?
Owning one franchise can be profitable, but owning several can be much more profitable. If you are not an experienced multi-unit franchisee, it is essential to keep in mind that by committing to opening multiple units of one beauty franchise brand, that you are putting your eggs in one basket. Be sure to understand the risk and ensure you will survive if things don’t go as planned. It’s a good idea to speak with multi-unit franchise owners to learn all you can about their experience and to engage the services of a CPA and franchise lawyer who can help you understand the risks.
Never forgot that not all franchises are a sound investment. It's important to carefully evaluate both the market demand for the product or service the beauty franchise you are interested in offers as well as the stability and track record of the franchisor.
To learn more about the opportunity of investing in a beauty franchise offers, read Tap Into the $62 Billion Beauty Marketplace With a Beauty Franchise.
Share this Feature
Comments:comments powered by Disqus
- Multi-Unit Franchising
- Get Started in Franchising
- Open New Units
- Featured Franchise Stories
Featured Beauty Opportunities