The Benefits of Owning Multiple Franchises

One of the benefits of owning multiple franchises is the opportunity to diversify your investment portfolio. With traditional investing in stocks and bonds, it is common to have your money spread out over different options. You can also achieve investment diversification with franchise ownership.

Investment Diversification Through Owning Multiple Franchises

An estimated 54.8% of all franchisees in the U.S. today are multi-unit franchise owners. For the past decade,  investing in multiple units has been a strategy of franchise owners who want to expand their portfolios.

Benefits of Diversification

Three benefits mentioned for diversifying include flexibility, growth, and survival.

• When you have more to offer, you appeal to a wider customer base. ProSource has diversification with 50,000 products, and yet, franchise owners don’t have to carry massive quantities of inventory – so it’s very flexible!
• Risk mitigation. If one of your franchises hits a rough patch or a downturn, there’s less worry. Your overall financial risk is lower because your other franchise investments might still be doing great.
• The more market share you have, the more revenue you can generate. ProSource territories are developed specifically to target the trade pro customer base and the niche element of the franchise is growth-oriented in the marketplace.

Drawbacks of Diversification

There are some potential difficulties in diversifying, and they’re worth mentioning. At ProSource, we certainly want to sell franchises, but we’re not a fit for everybody.

• Lack of focus. Spreading your resources and attention across multiple franchises can lead to a dilution of focus. This might result in a scenario where none of the franchises receive the full attention they need to thrive. Balancing the needs of multiple units requires careful planning and delegation, and there’s always a risk that one or more units may underperform if they don’t receive adequate oversight.
• Internal competition. If your franchises are in similar or overlapping markets, you might face market saturation. This can lead to internal competition where your franchises are vying for the same customer base, potentially cannibalizing each other’s sales. This is particularly a concern in densely populated or highly competitive areas where consumer choices are abundant.
• As your portfolio grows, you will have more complex issues to manage, so you need the right team in place. That means a solid franchisor team and your accountant and lawyer who are familiar with franchising diversification.

Same Brand or Different Brands: Diversification Options

Melissa Lewis has been a franchise consultant for 20 years. She says diversification in franchising happens in one of two ways: building a multi-unit franchise with the same brand or choosing multiple brands.

Same Brand, Multiple Units

Lewis notes it can be easier to scale the business when you diversify through owning multiple units of the same brand because you have already learned the business model. This has been the case with ProSource Wholesale franchisees who have added multiple units to their portfolios.

The challenge of multi-unit ownership in the same brand is that all of your assets are tied to a single industry, and if something profoundly impacts that industry, you could feel that impact across your entire investment. That’s why it’s important to choose a solid industry, like home improvement, that can weather economic challenges.

According to Statista, the home improvement industry has a history of growth. It’s projected to exceed $600 billion by 2025, more than double what the industry recorded in 2008.

Ownership of Different Brands

Owning different brands of franchises can be a bit of a process, and it starts with knowing whether the franchisor permits this kind of diversification, and if so, what parameters may be connected to it.

Something to be aware of in this scenario is that you’ll need to learn multiple business models, and that will take more time than adding another unit for a model you already know. However, if you choose brands from different industries, you can have broader asset diversification, which can be helpful if one of your industries tends to be riskier.

Talk to ProSource Wholesale

We have franchise owners who own multiple ProSource units, and who own a ProSource franchise as part of other franchise brands in their portfolio. We offer an attractive investment with a $6.5 million AUV, and we look forward to having that discussion with you.

Submit our franchise form today and a member of our franchise development team will connect with you to start the conversation.