So, you’ve got a franchisee who wants a multi unit franchise deal.

Whether it’s for two franchises or more the question is what’s the deal here? You’re not sort of options when it comes to this but anything is better than just giving first refusal without any form of commitment. That’s not closing the deal is it? But there is a way that you can approach this as a franchisor that looks after your interests. Here. I’ll provide a few pointers and a framework that should suit most franchisors.

How many multi unit franchises is too many?

An enthusiastic franchisee might want to let you know of their grand plans. They might say that they eventually want to be running 10 locations for example. You’re excited. They’re excited. But what now? As a franchisor before you even contemplate the number of units in the deal you need to look at the franchisee. Are they up to it? Do they have the capital for it? Are you happy to be dealing with that owner who will have more clout in your network? If the answer to either of these is no then that’s hopefully when you’ll let them know they can join as a single unit owner and then prove themselves later on down the line. If they do well they can stake their claim to another franchise. But what if they want a more certain pathway to multi unit ownership? Well then my friend, we’re talking about a development schedule.

Development Agreements in Franchising.

A verbal agreement isn’t worth the paper it’s written on. We’ve all been let down by promises and so in franchising at least let’s get something signed. If a franchisee wants to run several locations then they can, with some rules. A few decisions need making on how long someone can take to open the multiple units. So let’s take a pretend example of a franchisee buying a Rainbow Care Group franchise and they want to own three franchises. The total investment is £27,500 plus vat and £15,000 of that is the franchise fee. The franchisor would like the second and third franchise to be launched at 9 months and 15 months respectively. Now to hold the exclusive option on these the franchisee makes a part payment of the second and third franchise of 33% of the franchise fee, so £5,000+vat x2. Territory #1 is launched and the franchisee cracks on. It can be more than 33%, or less – you decide.

When a development schedule is broken.

Let’s say our entrepreneurial franchisee gets to month 8 and isn’t ready. What now Mr Franchisor? That wasn’t supposed to happen. Well here at Lime Licensing Group we have a simple outcome. The Franchisee simply loses their right to the additional franchises. They aren’t in any legal spat with anyone, the rights simply end and their deposit is lost. They carry o as a single unit owner and the Franchisor can now entertain other investors.

Deposits in multi unit franchising

It is the act of putting money down that jolts some realism into the franchise purchase. With that simple act comes a sharper focus, a more determined effort and a commitment that words can’t deliver on their own.

Putting your money where your mouth is makes the deal real. Otherwise everyone’s just talking about multi unit franchising. We all know that action trumps intent and deposits that can be lost sorts out the talkers from the action takers.

Contact Andy Cheetham for any franchising queries.