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MULTI-UNIT FRANCHISING

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A major movement in the franchising field is the development and utilization of multi-unit franchising programs. A multi-unit franchisee is an individual who owns and operates more than one franchise. This most often occurs in urban areas or in populations which provide opportunities for multi-unit franchising.

Historically, multi-unit franchisees come from new franchisor programs. The beginning franchisor is desirous of expanding their franchising system as rapidly as possible. To do this, they quite often grant specific geographic areas primarily DMAs (designated marketing area). As we discussed previously, the DMAs television market area developed by  A.C. Nielson, and is probably the most common method of allocating geographic territories in franchising. The DMA is simply a map that outlines television viewing markets exclusive of one another based on measurable viewing patterns and populations. Charles Valluzzo of Baton Rouge received basically the Baton Rouge DMA area when they originally signed their franchise agreement with McDonald's. Today, they have thirty-six McDonald's units in this market area and they have developed two McDonald's Express units in this area.

A multi-unit franchisee generally begins with one unit and often utilizes the profits from that unit to expand into the second, third, and fourth stores.  Many larger franchisors limit franchisees to one, two, or three independent units.  However, some franchisors seeking rapidly expansion and development encourage a franchisee to expand to as many as five, ten, twenty, or even forty units.