Due Diligence: Multi-brand Franchising

Author: Jeff Lefler

Date: DEC 12th, 2014

Topic: Industry Experts

For starters, let’s make a distinction between multi-brand and multi-unit franchising. In general, a multi-unit franchise consists of ONE brand, across multiple franchise units – units being franchise locations scattered across a city, state, region. For example: no matter where you go, you recognize a Burger King restaurant when you see one. What you might be surprised to learn is that BK franchises are just one of many brands in a franchisor’s portfolio of ownership. Companies that own BK franchises include: Carrol’s Group, Heartland Food Corp., Strategic Restaurants Acquisition Corp., and several others. The reason? Diversification! Just as you maintain some level of diversification in your personal portfolio of financial assets (stocks, bonds, mutual funds, etc.), the concept applies to franchisees as well. Remember the advice of not putting all your eggs in one basket.

How Do I Get Started?

Presumably, you already have successful a track record of running at least one franchise unit, and you have met and/or exceeded the franchisor’s expectations as detailed in the FDD and the Franchise Agreement (FA). Certainly as part of your due diligence BEFORE you purchased a franchise, you gained knowledge of other brands in the franchisor’s portfolio. Armed with that knowledge, you know what other brands there are. More importantly, as you consider expanding your own franchisee portfolio, you are in a unique position to consider if and how you can use your knowledge, expertise and experience to contribute to the success of another brand. But it starts with your level of interest in the brand; your passion to make it successful as part of your portfolio.

Another critical step is to find out if there are any restrictions or limitations to your expansion into another brand. This kind of information should be spelled out in the FDD and FA you signed. A critical due diligence task would be to double-check with your franchise attorney. He/she may not have had this in mind when they originally reviewed the FDD on your behalf.

Talk with the franchise owner about what opportunities are available that are a good fit for you. Keep in mind that taking on the responsibility of a new franchise brand will likely entail and require the same commitment of time, money, passion that you put into building up your initial franchise. Do you have the resources (stamina, financial, family/partner support)? Can you add another set of chainsaws to the mix you’re already juggling?

Doing Your Research

Beyond what is mentioned above, your due diligence should certainly include talking with others who have already tried it. No need to reinvent the wheel. Your fellow franchisees within the same franchise, other associates from your professional networking circle, and those from your local franchise association and/or chamber of commerce will be eager to share their words of wisdom based on their own experiences.