Multiple choice

At Domino's, as with many other franchises, two units are better than one. And even 50 units is okay. Encouraging franchisees to take on multiple outlets is entrenched in the pizza giant's business model. The company has 520 UK outlets run by 135 franchisees, or an average of 3.8 per head - and aims to increase that to 1,000 stores run by 200 franchisees in the longer term. Two of its franchisees own more than 50 stores.

And the Domino's trend is the way to go, according to the latest research. Over one fifth of franchisees now own multiple units, with an average of seven units each, according to the NatWest/bfa Franchise Survey 2008. This trend covers many sectors, but is most prevalent in the hotel and catering sector.

The trend towards multiple units is rising too, says the survey: franchises with multiple units are more likely to be profitable. Relatively few franchisees make a profit over the first two years, it finds, but more established franchisees with a track record, multiple units and staff are more likely to report profits.

And while some might argue that franchising already presents enough challenges with a single outlet, multi-unit franchising works very well, says Andy Hirst, Domino's head of franchise development. "From the franchisee's point of view, they have a robust business which is much less vulnerable to changes around them. We find that our franchisees are keen to expand, because they end up making more money."

Franchisees who take on the challenge of running multiple units find there are economies of scale that benefit their business, including payroll, accountancy and other costs. The scale of the business also means it functions better. "They can provide better career opportunities for their people, so there are real benefits for the franchisee too."

There are massive benefits for the franchisor too: Domino's works with experienced franchisees who can build a solid business. Banks, too, are supportive. While financial institutions will typically help with 70% of costs for a new business, they are happier to lend 100% of the costs of a new outlet for a franchisee with a strong track record who is clearly able to service those debts.

Franchisees who expand to another outlet can also make the different enterprises complement each other. Chem-Dry marketing executive Mark Richardson says there are different reasons why franchisees want to split the business between the domestic, commercial and insurance sides, but the benefits can be huge. "We find that the businesses will piggy-back on each other and bring different revenue streams which support each other," he says. "And there can be real benefits to franchisees in breaking the business down and having separate franchises."

That formula can be a winning one, agrees Derek Rogers, head of franchising and field services at McDonald's UK. "McDonald's has always looked to grow its business with its franchisees," he says. "In fact, in the UK today, the average restaurant ownership is four. There are many benefits to multiple site franchising for both the franchisee, the suppliers and the company."

Creating a synergy between the three parties means real benefits to the customer.

"The trick is finding the right franchises with which to grow. Growing the scale of the organisation brings tangible benefits. Hiring and developing people, establishing the business in the local community, developing strong local marketing campaigns to drive sales and using scale to reduce costs all allow a bold approach to investment in areas that directly benefit the customer."

But franchisors are also wary of giving too much coverage to the wrong people. "Some franchisors believe that if a franchisee has lots of territories, they're making money anyway and so will not sweat the patch," says Chris Gillam, ex-managing director of Mail Boxes Etc and now its independent consultant.

With that in mind, Mail Boxes Etc only encourages franchisees to open another outlet when they are ready. When they pass that test, they are offered a second outlet at reduced cost - the franchisor effectively passing on recruitment savings to the multi-unit franchisee.  "Some of our [multi-unit] franchisees, like our current Franchise of the Year in London [see box], are doing a great job and making great money, with a great service to support them."

Yet becoming a successful multi-unit franchisee presents real challenge, say insiders - many new franchisees have initial difficulties with just one. So how does it work? Multi-unit franchisees follow a recognisable pattern at Domino's, says Mr Hirst: they typically work their way up, becoming their own store manager. The franchisor then offers training including advanced management courses to help the franchisees appoint their own store managers, and keep their growing business running smoothly.

And while the best franchisors help their franchisees to expand, there are pitfalls, warns Mr Rogers. "The transition from small business franchising to a medium sized organisation is not an easy one - that's why McDonald's only grows with the best," he says. "Those franchisees that take this step have to move from directly managing a small restaurant to leading through a high performing team. In some of our larger organisations, the franchisees work alongside teams of 800 to 1,000 employees, and have well-established back office teams and systems."

For successful multi-unit franchisees, the profits and lifestyle benefits can be huge. "They do a great job, building up a business of their own, and they deserve the awards," says Mr Hirst.  The headaches of multi-unit franchising might sometimes be greater, but so too are the rewards.

Domino's

It sounded an ambitious plan when Paul Ashurst first hatched it - 10 stores in a decade. But with the opening of his latest Domino's store this December, the 34-year-old has done just that, and says he'd do it all again.

"Even as a young lad I was involved in money-spinning schemes," he admits. "It was almost in the blood that I would run my own business."

So with a degree in business management studies, Mr Ashurst joined a graduate training programme for another company and became a store manager. "But I knew I wanted to run my own pizza business, not work for one," he says. "I became frustrated with the system as there was no opportunity to progress."

Expanding rapidly with the backing of 10 friends and investors, Mr Ashurst found that opening the third store was the steepest learning curve: suddenly he had to drop daily duties for a management role. He trained his own staff in store management, with Domino's backing, and the bank too backed him all the way.

"It's been hard work, but the rewards are immense," he admits. "I'm starting to reap the rewards, with a villa in Florida, and a better work-life balance too. Now I have a bright future to look forward to."

Mail Boxes Etc

As Franchise of the Year for Mail Boxes Etc, brothers-in-law Murli Mulchandani and Rikesh Nichani always knew they were aiming at managing franchises, and not just running them. After opening their first franchise in an Internet café, they opened a second and then built expertise and looked for premises to open a third, fourth and even fifth.

Moving from being hands on to finding good managers and assistant managers means using good judgement, says Mr Mulchandani of KKJ Ltd in London, who points out that some franchisees are reluctant to let go. "It's been about four years now since I opened up or closed at the end of the day, except in an emergency, or cashed up," he says, "because you have to accept that someone else can do just as good a job as you can. And if people do make mistakes, then you have to bear with them."

So why expand? "We wanted something more challenging, and to make more money and have other stores too," says Mr Mulchandani. "Now the time is right."

Ironically the credit crunch is helping, he says - premises are now easier to find. And funding? Not a problem, says Mr Mulchandani, when banks recognise a good track record and are happy to back successful franchisees.

McDonald's

Graduating in chemical engineering and fuel technology in 1983, Pritpal Singh admits that he saw McDonald's as a stopgap: fellow graduates were earning much higher salaries in engineering. But 25 years later, he is outstripping them with a chain of successful restaurants.

He had risen to operations manager when the opportunity to become a franchisee arose. He jumped at it, with a restaurant in Halifax. When the chance to take on Keighley, and then open one drive-through after another, he filled the gap by promoting the staff he had trained himself. "You invest in people, and they pay you back with their hard work," believes the 47-year-old.

He then sold those four outlets for a joint venture deal which now means he has 21 Yorkshire restaurants, with a newly-opened £1.5m refurbishment. "My wife works with me, and my two children aged 19 and 17 have become involved too," he says.

"I saw how hard my father worked, on permanent nights, and that work ethic inspired me. If I take a day off, I do something with it, and with the family. But I love what I do, so it's not difficult." Now the master plan is to have more - a total of 30 over the next decade, and counting.

Chem-Dry

When Neil Barlow and fellow director Richard Harris took over Chem-Dry's Central franchise six years ago, the business with its five licences ranging over different territories kept them busy. But just six months down the line, another area came up and its three licences were just too good to miss.

And so it went on, with a steady expansion till the pair now have 21 licences and two separate offices. Running a sizeable business means headaches, admits Mr Barlow, especially when it comes to sizeable overheads and complicated logistics.

But the benefits are huge too. "I enjoy employing lots of people and making a sizeable contribution to society, although I don't much enjoy writing an enormous cheque to the Inland Revenue!" he adds.

And running a large business brings real advantages too, when specialist flood and fire divisions can help each other out at times of need. And while the debate about the impact of recession and its effect on franchising rumbles on, there are definite benefits of scale: as demand from some quarters shrinks, there is increasing demand from home owners who wanted to move but are now deciding to put the money they would have spent on new carpets into making their old ones look and feel as good as new.

Subway

Husband and wife team Murray and Maria Speirs know all about opening one Subway store after another - they have 18 years of experience in doing just that. They opened their first Subway in Winnipeg in their native Canada back in 1991, and then moved to the UK to repeat that success here.

Their first UK Subway opened in Brighton five years later, and the couple have built on their successes - as the UK's first Subway developers, they now have 44 stores open in their development territory of Sussex, and are franchisees of two stores of their own too.

And while their rapid growth has been a steep learning curve, the key is simple, says Murray: "Perseverance is important. When a friend was struggling, my message was, 'don't quit'. He now has 44 stores."

And being hands on while you grow and build a good team is crucial, Maria adds.

Work-life balance is important too, Murray believes: "Subway is great, but the family is number one. When we go to a convention, say, we always extend the visit to enjoy ourselves. Making money is good, but so is making time for each other, and we tell other franchisees to remember that too as they go on expanding."