Multi-Unit Development Franchise
Every franchise system will have a single-unit franchise offering but opening and managing a system of individual owners may not be what your planning envisioned. If your targeted franchisee is a multi-unit developer, then it is essential that the structure of your franchise offering be done in a way that is attractive to that class of investor. Taking even a deeper dive into understanding your prospective franchisee, how you structure your franchise offering for a strategic franchise and/or an investment franchise, should be different.
Having the same initial and continuing fees and the same level of support services and obligations for each class of franchise makes little sense in modern franchising.
Determining in advance whom you want as your franchise is essential. Only after that decision is made can you structure your franchise offering appropriately and have the proper business case that will allow you to realistically attract and expand your franchise system as you planned.
When a franchisee agrees to open multiple locations throughout a defined period, this is traditionally called a multi-unit development agreement. In this type of agreement, it is not uncommon for franchisors to reduce the franchise fee for locations the franchisee is scheduled to open later on in the development schedule. For example, the franchisee will be required to pay the normal £35,000 franchise fee for the first two units it opens, but only £30,000 for units three through five. This operates as an incentive for the franchisee to open more than one unit. It is also becoming more common for multi-unit franchisees that sign a development agreement also to pay a lower continuing royalty fee.