How diversifying your franchise portfolio can ensure prosperity

franchise, the venture magazineMuch like you keep a portfolio of different stocks to diversify your investments, as a franchisee, you stand to benefit from owning multiple franchises. A diverse franchise portfolio can set you up for success with decreased risk. The best part is, establishing that first franchise is the hardest. Once you’ve done the legwork of researching, familiarising yourself with the details of a franchise agreement, and devising a marketing plan, the process becomes easier and easier with each successive franchise you buy.

Multiple units of one brand

The biggest choice to make in expanding your franchise portfolio is whether to purchase multiple units of the same franchise or invest in another or several more brands. The immediate benefits of buying multiple units of one brand are obvious. You already know the product and the system and have  a relationship with the franchisor. Adding more units to your portfolio can lower costs for equipment and ingredients if you can strike a deal with vendors for buying in bulk. Several of Australia’s top franchisors, such as MadMex and Roll’d, are restaurants, which can easily build loyal followings with customers who appreciate knowing what they are getting every single visit in terms of quality and consistency. From a business standpoint, you can use a single marketing strategy — perhaps with small tweaks for unique locations — that is less costly per unit and has the potential to increase revenues exponentially. It’s also easy to shuffle employees from one location to another in a pinch and to promote from within.

Multiple brands

franchise, the venture magazineInvesting in units from different franchisors takes more work on the front end, as you have to learn different systems and keep them straight in your mind. But the diversity can be an advantage by tapping into different markets that you can then cross-promote your various businesses to. It’s most helpful to choose businesses that are complementary, such as handyman franchise Hire A Hubby and Snap-On Tools. Such an arrangement could allow you to reduce costs by using one franchise’s product in the other franchise and have the expert handymen promoting and marketing the tools they trust. Foodco makes things easy by offering similar brands under the franchise umbrella in Muffin Break, Jamaica Blue, and Dreamy Donuts.

Keep It Simple

You might be tempted to add something to your portfolio for sentimental reasons: You enjoy the product, or your favourite celebrity endorses it. If you have cash to burn, that’s OK. But if your goal is maximising revenue, stick with a brand that has proven profitability. You might not personally find tax preparation or batteries particularly interesting or fun, but H&R Block and Battery World consistently rank among Australia’s best franchises. They also have easily replicable concepts, and a proven formula for store location and layout that lend themselves to uniformity.

Dynamic Brands 

franchise, the venture magazineTimes change, and along with them customer preferences and tastes. Brands that have proven they can adapt with the times are built to last and will continue to be reliable revenue streams for years to come, which is the hallmark of a good investment. Franchisors such as EnVie Fitness and Poolwerx have identified a need then grown into their own. EnVie saw a chance to create fitness programmes that focussed on women’s health and has since adapted to women’s changing lifestyles and fitness interests, with classes ranging from yoga to Zumba to barre. Poolwerx has grabbed a large market share in pool supplies by offering quality products and services that cover every base a residential or commercial pool could need, including converting pools to saltwater from a chlorinated system.

Providing Stability

Just as diversifying your stock portfolio allows you to hedge your bets and be less vulnerable to a downturn in one specific area, diversifying your franchise investment does likewise. If you are investing in multiple brands, provided you do your homework well and barring a total economic crash, if one franchise struggles the others are likely to make up for it. Even if you buy several units of the same brand, you’ve still protected yourself against misfortune. Say there is heavy construction that diverts traffic from one location for a period of several weeks or months. Your other locations can pick up the slack during the temporary downturn, and you can still have a centralised call centre to service customers put out by the change.