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If you are in the franchising business, you will be familiar with the term multi-unit franchising. However, you may be less familiar with ‘multi-concept franchising’. Multi-concept franchising is a growing phenomenon. It refers to instances where a business owner becomes a franchisee of more than one brand. This article will explain multi-concept franchising and outline the difference between multi-unit and multi-concept franchisees.
What is the Benefit of Multi-Concept Franchising?
Multi-concept franchising is also known as multi-brand franchising. It simply means that a franchisee is a franchisee of more than one brand. For example, a multi-concept franchisee may own and operate a Costa Coffee and a separate Subway franchise. Owning franchises across multiple brands allows franchisees to diversify their portfolios.
A benefit of owning franchises across multiple brands is that it can equip franchisees with a more extensive skill set than they would have if they operated one unit for one brand. This can be attractive to franchisors, who might be more likely to hire franchisees who have successfully implemented the systems and observed the standards of different brands.
What is the Difference Between Multi-Unit and Multi-Concept Franchising?
Usually, a multi-unit franchisee will open a number of units within a specified territory. Rather than a standard franchise agreement, franchisees of multiple units tend to share an Area Development Agreement (‘ADA’) with the franchisor. An ADA grants them the right to open and operate several units in their area.
On the other hand, multi-concept franchising involves franchisees acquiring franchise units across multiple brands. Franchisees may opt for this method if they want to build their portfolio across different franchised businesses.
Both ways enable franchisees to operate more than one franchise unit. Multi-unit means that they run two or more units of the same franchised business. Multi-concept means that they run franchise units of two or more different brands. The main reason both of these types of franchising are growing in popularity among franchisees is that they allow franchisees to expand their franchise portfolio beyond a single unit.Continue reading this article below the form
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What Are the Risks of Multi-Concept Franchising?
Like any business pursuit, there are some risks you should be aware of before becoming a multi-concept franchisee.
1. Check Your Franchise Agreement
If you are a franchisee who wants to open a franchise of another brand, you should check your existing franchise agreement. Depending on the terms, you can take on a non-competitive franchise.
However, the terms may prohibit you from opening a unit of a different franchise in the same or a similar industry. For example, if you operate a sandwich shop franchise and want to open another under another brand, there may be terms in your franchise agreement prohibiting you from doing so.
2. Complex Business Relationships
The relationship between a franchisor and a multi-concept franchisee can undoubtedly be more complex than that of a single or multi-unit franchisee. Some franchisors may also be wary of multi-brand franchisees as they fear a cross-franchise leak of trade secrets or specialist knowledge.
Your decision to opt for more complex forms of franchising can depend on your experience level. Entrepreneurs who are new to franchising should opt for a single-unit franchise before considering expansion through multi-unit or multi-concept methods.
3. Franchisee Involvement
A franchisee’s decision can also depend on the type of involvement they want in their business. Owning a network of units as a franchisee can be more administratively and managerially complex than focusing on one. Suppose you want to be on the ground, providing goods and services to customers. You may want to focus on a single franchise unit and pour your energy into it rather than spreading your management across multiple units.
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Multi-concept franchising is an emerging form of franchising newer than multi-unit franchising. It involves a franchisee operating units across two or more brands. In comparison, multi-unit franchising involves a franchisee owning units of the same brand in different locations. Despite their differences, both are methods of franchisee portfolio expansion. Nevertheless, some of the risks of multi-concept franchising include:
- potentially breaching a non-compete clause of an existing franchise agreement;
- the complexity of managing franchises across different brands; and
- increased administrative and managerial responsibilities.
If you require legal assistance with expanding your franchise portfolio or to look at the terms of your existing franchise agreement, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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