MULTI-UNIT
NEED TO
KNOW
Buyer’s Guide
What’s DRIVING
Multi-Unit GROWTH
Stats point to continuing multi-unit expansion
F
or the past few years you have heard
me note that the majority of franchised units in the U.S. are owned
by multi-unit operators. With more than
400,000 franchised units in the country,
multi-unit operators control about 53 percent
of those units. That’s impressive, and the
percentage controlled by multi-unit operators is rising. This growth is a consequence
of many brands focusing their development
models on multi-unit development packages over single-unit programs.
Today, FRANdata’s database shows
the following breakdown of multi-unit operators (MUOs):
These are the “known” franchisees
in our database. While we try to keep up
with the changes in each franchise system,
our database does not include current
data for all of today’s 3,500-plus brands.
Therefore, each category understates the
actual total. Since our database is more
current with the larger brands and most of
the smaller to medium-sized brands, any
under-counting is primarily with the lessestablished brands, which are less likely to
have many multi-unit operators.
Statistically, we think we have more
than 90 percent in each category. Using
this 90 percent confidence level leads us
to the estimated counts in the right-hand
column. Thus, in total, we believe there are
more than 38,000 multi-unit operators
in the U.S. With the number of units they
control and the brands and sectors they
operate in, that puts the combined annual
revenue of multi-unit operators somewhere
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MULTI-UNIT BUYER’S GUIDE 2013
around $100 billion. There’s some serious
operational, business, and political influence in that figure.
We know the number of units they
control is growing. But how is the number
of multi-unit operators changing? For that,
we can turn to our actual database counts.
Assuming the actual-to-estimated changes
are consistent, the actual counts should
reflect about the same percentage change
per category that our estimated numbers
would show.
In a three-year span, we’ve seen a 17
percent increase in entry-level multi-unit
operators. That’s certainly consistent with
our analysis of the development models
franchise brands have been using over the
past few years. To wit, entry-level multi-unit
operators’ average annual growth of nearly
6 percent slightly exceeds the growth of
franchised units generally, which has been
expanding by about 5 percent per year.
Much more interesting is the expansion of the larger categories of multi-unit
operators. In the three-year span, those
categories expanded about 25 percent. Even
more interesting is the consistency with
which each category expanded, ranging
between 24 and 28 percent.
Several obvious trends are affecting
these outcomes. Multi-unit development
models became a common form for expansion only in the past 20 years. In a life cycle
sense, the data confirm that this model is
still solidly in a growth mode. And although
many franchisors have had to cancel contracts for development, especially for the
second and third units within the contract
timelines, these data suggest that many
second, third, and fourth units have been
added in recent years.
We al ͼ