How to diversify a multi-unit franchise portfolio

Posted on 2 November 2020
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Franchising is an arrangement where one party allows another to use its systems, processes, name and trademark to conduct business.

A person buying a franchise will normally go for a brand that has been around for some time, is well established and will potentially exist for the foreseeable future. But what then happens if the franchise you choose for isn’t yielding the anticipated returns? Or what if the growth rate is slower than you projected? ABBA Group typically advises our clients who are looking to boost their franchise returns to diversify – wisely. While diversifying is an old concept assumed to be obvious to most franchise investors, there are key steps that many people tend to miss. Below we have compiled a simple guide to help you to diversify your multi-unit franchise portfolio without compromising any of them.

 

Step 1: Carve out a niche

Before adding any new brands to your portfolio, it may be wise to examine yourself as an investor. You want to ensure that you figure out what you’re passionate about and will enjoy getting behind. But that doesn’t mean that architects should only invest in architect-related

franchises. To the contrary, you may be an accountant but enjoy working in the hospitality or the sporting sectors.

Finding your personal sweet spot will ensure that you remain motivated, both as an investor and from a personal perspective.

 

Step 2: Carefully evaluate brands

It’s not enough to invest in the food industry because you have great culinary skills. After identifying what works for you, it is crucial to evaluate market brands to find one that’s actually going to be profitable to invest in.

The market is full of attractive franchises but you need to look beyond the bells and whistle and carefully evaluate each one.

For starters, you want to keep an eye out for established brands with solid growth and consistent leadership. Such brands will have a proven track record. An example would be Australia’s Food Co, having been around for over 30 years now and an owner of some of the region’s leading cafe franchises including Dreamy Donuts, Jamaica Blue and Muffin Break.

Whichever field you choose to invest in, don’t be afraid to aim for the market leaders. Remember, brands that are already successful will have a clear growth strategy.

 

Step 3: Balance between emotional and finance driven investing

When diversifying your multi-franchise portfolio, be careful not to invest with your heart but your calculator. First-time franchisees tend to make the mistake of investing in a brand simply because it appeals to them. While your heart may tell you to follow your passion, the financial side must add up too. Business decisions should not be emotional but analytical if they are to lead to success.

Ensure that you fully understand the business side of any franchise you plan to invest in regardless of the “greatness” of its product or service. The numbers must be able to sustain a reasonable return on investment or you risk getting burnt.

 

Step 4: Get the right team

If you own multiple franchises, delegating will help you to succeed. First, you need to have the right people in the right positions.

Look to hire people who share the brand’s vision and mission – a team that believes in a business will be willing to learn as much as they can about how it operates and will be able to take on duties that would normally be your responsibility. This will free up some time for you to be able to focus on all your brands.

 

The bottom line

Diversifying your portfolio is a no-brainer which presents lots of options to choose from. However, actually understanding how investing in multiple brands works is critical if you’re going to succeed. Look out for brands in your specific areas of interest and narrow down the list to what suits your lifestyle and business goals best.

Once you have a shortlist of the preferred brands you would like to partner with as a franchisee, contact the team at ABBA Group and we will put you in contact with the right people immediately.

 

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If you’re looking to invest in a franchise, our extensive database of franchises for sale covers some of the world’s leading brands.

Register as a buyer today, and we’ll aim to find suitable franchises for you immediately.