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Owning More than One Franchise Brand

Multiunit franchise owners may have more than one brand in their portfolio. Is that good for their financial health? Or not so good?

Franchisees may feel safer with multiple brand diversification, thinking that it's less risky than having all their eggs in one basket:

Take, for example, Atlanta-based GPS Hospitality, which got its start in 2012 when a group of former Arby’s employees purchased 42 restaurants from Burger King corporate. The franchisee, which now numbers more than 200 Burger King stores, recently opened seven Popeyes Louisiana Kitchen units as a way to spice up its portfolio, says Scott Jasinski, CFO of GPS Hospitality.

“It provides the same upside potential and downside protection that any individual investor has with a diversified portfolio,” Jasinski says. “From a return-on-investment standpoint, a company can maintain much more consistent results … when you have [multiple] brands.” — Brendan O’Brien, QSR

Franchisees may have come up against a wall:

[Clyde] Gilfillan [ a North Carolina–based consultant with more than 25 years of experience in the foodservice industry] says franchisees who explore adding brands to their portfolio do so because they’ve run out of areas to develop more sites, or the franchisor has decided against more growth in their area. For GPS, bringing Popeyes into the fold helped the company expand without leaving the greater Atlanta area. —O'Brien, QSR

Other considerations pushing franchisees to add other brands to their portfoliios are to better cope with fluctuations in the commodities market, to counteract the seasonality of their business or to benefit from economies of scale. The systems they already have in place, such as training or bookkeeping, may be easily adapted to the new brand.

 

 

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