Dilemma of Franchise Holders - Dilemma of Franchise Holders...

Dilemma of Franchise Holders
Multi-Site Franchisees
There appear to be more multi-site franchisees being approved this is where one operator is
permitted to own multiple locations under the same franchise system. This makes sense, at least
on a superficial level. Why not grant another franchise to a successful franchisee. They will not
need to undergo extensive initial training. They have already proven themselves in the system.
They are likely to be able to borrow based on the existing cash flow and borrowing capacity of
the existing business. They know the brand and are already part of the franchise “family”.
There are clearly many benefits in allowing an existing successful franchisee to expand. And
many franchise systems have openly and publicly encouraged this, including Shaver Shop, Hair
house Warehouse, Boost Juice and Anytime Fitness to name a few. However there are risks and
costs associated with encouraging multi-site franchise ownership. Normally there is a prohibition
on a franchisees owning more than one franchise in the template franchise agreement and for
good reason. There is a need for continuity in the running of any individual business and there is
generally a provision in the franchise agreement requiring the manager to be “full time” in the
business.
In addition, often the franchisor requires the “nominated manager” to be the actual business
owner franchisee to ensure there is “hands on” management of the business. When a franchisee
purchases a second or third, or fourth franchise, how is that person going to divide their time
between the stores particularly if they are far apart. Does the franchisor allow the franchisee to
run each store part time and grant an exemption to the standard provision or will the franchisee
be allowed to employ managers to run some stores. If so, what happens to operating standards
and customer care in the remote stores
In addition, consider what happens if the relationship sours and the franchisor has to breach the
franchisee. If one franchise business is terminated for poor performance, will the relationship be