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Common tactics to expand a successful franchise as a franchisee

On Behalf of | Feb 5, 2024 | Business Law |

Those who dream of running their own business may choose to start a completely new company. The downside to building a business from scratch is that is a lot of risk and work involved in that approach. People have to develop a market niche, advertise, manage their business and plan for the future with little support.

Some entrepreneurs decide that they’d rather decrease their risk and increase the support they receive by buying into a franchise. They enter into an agreement with an existing business to operate a standalone facility under the name of the franchisor’s brand. When the initial investment in a franchise opportunity proves successful, the franchisee running the business may hope to expand their operations. There are typically two viable options for those hoping to expand franchise operations after initially succeeding with a single location.

A territory expansion

Particularly when the franchisor has only recently begun offering franchise opportunities in a region, people may be able to revisit their original territory protection agreement and expand the area in which they intend to operate. They can then invest in additional locations within that territory. Territory expansion could occur a little bit at a time as a franchisee earns income or brings in new investors. Territory expansions may not be the most realistic option for a well-established brand with numerous other franchise locations nearby.

A multi-unit expansion agreement

Franchisors typically work with franchisees who desire a single location. Most of the requirements for entering a franchise agreement assume that the franchisee will run a single business. However, many franchisors also agree to multi-unit expansions. Such agreements could be a viable solution for a franchisee who has achieved success with their early operations. Renegotiating the agreement with the franchisor to expand to additional locations could be a smart decision. However, such agreements often require that someone commit to multiple new units at one time or renegotiate repeatedly as the business develops.

There are drawbacks and benefits to both systems depending on someone’s goals and how successful their early operations at one location have proven to be. Considering different expansion opportunities can help a franchisee potentially multiply the success they have already achieved.