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Multi-Unit Franchise: Why It’s a Smart Investment

by | Jan 20, 2023 | General | 0 comments

Multi-unit franchise ownership is a great opportunity to build wealth and secure your financial future. In fact, more than half of franchises are multi-unit operations.  Not convinced? See why it’s one of the best investments to consider.

What is a Multi-Unit Franchise Owner?

There are two primary types of multi-unit owners – Area Developers and Area Representatives. As an Area Developer, you own and operate two or more franchises in a defined territory. As an Area Representative, you own and operate or manage, typically 15 or more, franchises in a defined territory. Let’s dive into what goes into being an area developer and its benefits.

What’s Included in a Multi-Unit Area Development Agreement?

Area Development agreements start out the same way as a single-unit franchise agreement. You’ll enter into a franchise agreement for a single unit to operate in a defined territory. Unlike a single unit franchisee agreement, however, you will also enter into an Area Development agreement that will give you the right to purchase one or more additional franchise units in a protected territory. Most Area Development agreements are for 3-5 units. One key aspect of the Area Development agreement is the development schedule. In the development schedule, you and the franchisor agree to a timeline to open each of the units. The timeline typically stretches across multiple years and depends on how many units are in the Area Development agreement. Let’s cover some of the reasons why many investors opt to become multi-unit Area Developers.

Increased Opportunity for Wealth Creation

This reason is pretty straightforward. As a multi-unit owner, you’ll have more locations, which means the opportunity for more revenue and profits. Being a multi-unit owner also comes with the benefits of scale – namely, operating cost efficiencies. For example, marketing and many back-end staff, like accounting and management, can overlap for your locations. Your familiarity with the brand will also reduce the time and cost of opening a second, third, and so on.

Protecting Your Opportunity to Grow

Successful single-unit owners often want to expand only to find out that the territory around their business has been sold to other investors. The best territories for franchises are in high demand and can sell out quickly. Area Development agreements are a way to protect the territory around your initial business for your expansion. In addition, the Area Development agreement protects your right to open additional units over an agreed time period.

Lower Upfront Cost

Most franchises offer a franchise fee discount to Area Developers. The amount of the franchise fee discount varies depending on how many franchise agreements are in the Area Development agreement. For example, in Volofit’s 2022 Financial Disclosure Document, the franchise fees are as follows:

  • First and Second Franchise Agreements: $45,000
  • Third, Fourth, and Fifth Franchise Agreements: $35,000
  • Sixth through Ninth Franchise Agreements: $30,000
  • 10th and Subsequent Franchise Agreements: $25,000

Challenges Area Developers Might Face

Owning a muti-unit territory is a big undertaking. Once becoming an Area Developer, the franchisor expects you open your units within the agreed upon time frame.  You could be at risk of losing rights to your territory if you don’t meet the deadlines.

With a multi-unit agreement, you don’t just have to make one location work; you will have responsibility for several or more locations. You will want to ensure that the market territory has the capacity to support all of your units.  Thoroughly study the market before signing an agreement.

Invest with Volofit

Despite those challenges, multi-unit franchising is the perfect opportunity for entrepreneurs to expand their portfolios, and the fitness industry is the ideal market to do it. The global boutique fitness studio market was worth $49.30 billion in 2021, according to ResearchAndMarkets.com. The demand is only expected to increase, making Volofit a perfect multi-unit franchise opportunity. We have prime territories still available that are ideal for those looking to become area developers. Get started by filling out and submitting this form.

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