The difference between master franchisees interested in multiple units and those happy with single, perhaps part-time operations often comes down to personality. The more entrepreneurial, energetic, single-minded people who are interested in building empires are more interested in multi-unit, perhaps master, operations. "It kind of depends on who's doing it," McEntire says.
No matter who's getting into a Fiesta Insurance Franchise, President John Rost says multi-unit is a good option. The Huntington Beach, Calif., franchiser of insurance and tax preparation centers offers would-be entrepreneurs a low-cost way to get into business with a single unit. And because the concept scales well, Rost says, that initial modest investment can turn into significant income for those who open several locations.
The franchiser likes it, too, so the company encourages franchisees to go that direction. "We are set up to be multi-unit franchises," Rost says. "Our royalty rate goes down if you have a second location, and it's lower again if you have at least three locations."
In addition to generating more revenue, having multiple locations increases individual franchisees' operational efficiency, Rost says. And since Fiesta already handles many critical tasks such as cash deposits through its automated system, it's relatively simple for a single franchisee to oversee several locations. The company does encourage multi-unit franchisees to keep their locations within a single geographic market, however, because it simplifies management and allows for flexible staffing. Fiesta also encourages franchisees to visit each location daily or every other day.
In addition to people who start with a single unit and gradually add more in the same area, Rost will grant opportunities covering larger markets, such as major metropolitan areas, to owners who commit to opening a certain number of stores during the next three years. Today, about 25 percent of the company's franchisees have more than one location. "And probably a total of 50 percent of our franchisees are coming in with the idea of having multiple locations," Rost says.
The company has 60 active locations in eight states and plans to open 120 to 150 more this year. They still have "plenty of space," Rost says. "We're looking at about 2,500 across 20 states sometime over the next eight to 10 years. We're just getting started."
A very different opportunity requiring more investment and the chance to work with one of the world's best-known branding organizations can be found in Hampton Hotels, a unit of Hilton Worldwide. But Phil Cordell, global head of focused service and Hampton brand at the Hilton Worldwide Memphis headquarters, says many franchisees begin similarly, opening up one unit of the hospitality chain and adding more as time goes by.
Part of the reason for that is financial -- each franchise requires an investment of $7 million to $8 million. Another is that Hampton Hotels provides a relatively cost-effective entry to the hospitality industry, and its mid-price offering appeals to budget-conscious consumers even during recessionary times. "For folks that are new to hospitality industry, they build their first, and then they very quickly turn into multi-unit developers," Cordell says.
Franchisees exposed to the Hilton Worldwide system often use Hampton as a stepping stone for other Hilton concepts, such as Hilton Garden Inn and Homewood Suites, each serving a different consumer segment. Hamptons, for instance, don't have restaurants or bars. Garden Inns have restaurants, bars, and small meeting spaces. Homewood Suites offer extended-stay, full-suite accommodations with a dishwasher and kitchen in every room. Home 2 Suites is similar to Homewood but at a lower price point.
Hampton Hotels has about 1,758 locations and will open another 100-plus hotels this year and next. "It just keeps chugging along," Cordell says. "It's a machine here in the U.S. We're just starting to get some traction outside the U.S. and now we're really placing some emphasis on international expansion."
A similar vision of growth powered by a strong brand that gains momentum from extending its original market appeal with additional products and services exists at Seniors Helping Seniors. The Reading, Penn., franchiser of in-home, non-medical care services , however, decided to focus from the beginning on selling master licenses to franchisees. "At that time, there was no one else out there that we were aware of that was utilizing a master franchise approach in this particular industry," says CEO Philip Yocom, who co-founded the company with his wife, Kiran.
Yocom, with an extensive background in franchising, felt that senior in-home non-medical care and master franchising were a good match. "The senior in-home non-medical business model is really a very simple business model, which lends itself to utilizing a master licensing approach," he says. However, having seen many franchising organizations take an either-or approach to master franchising and single-unit franchising, he felt a blended approach was suitable in this case.
Most of Tutor Doctor's territories are based on ZIP codes, with each territory representing 75,000 to 100,000 people. The company also sells national licenses. These enable franchisees to market their services to unclaimed territories. Multi-territory operators represent a different arrangement, and one that calls for additional investigation of the franchisee. "We just spend a little more time up front with the qualification and making sure the fit is really good and the competencies are there," Milner says. "That's something we do in any case, we just take it to another level."
"One of our principles has been and always will be that we will be in the business ourselves to keep grounded," he says. With that in mind, rather than grant master licenses to develop the entire country, the company chose to retain the ability to grant franchisees, as well as to continue to operate corporate locations.
He also realized that not all franchisees were suitable for master licensees. Again, whether a single-or multi-unit operation is best depends on the franchisee as much as the concept. "The person who makes an ideal master license owner is someone who wants to help other people succeed in building their businesses," he says. "Whereas our franchise partners enjoy doing the actual activity."
