The Rise of Multi-Unit, Multi-Brand Operators in Franchising
“What’s all the M.U.M.B.O. jumbo about?”
In the franchise development world, not all prospective franchisees are alike. And in case you’ve been stranded on an island, the whale of all prospects for many franchisors is called a M.U.M.B.O. – a multi-unit, multi-brand operator.
That’s code for well-capitalized, diversified, experienced and in need of very little hand-holding on the part of franchisors. These franchisees are savvy. They hire well. They employ strong teams. They know their way around an FDD (Franchise Disclosure Document). And best of all, they tend to execute on time to achieve strong track records and top accolades for the brands they champion.
What’s not to love about deep resumes like that?
While most franchisees are single-unit owner-operators [true small-business owners], these franchisees can be giants by comparison. In fact, some M.U.M.B.O.s oversee bigger networks across multiple brands than many stand-alone franchisors. And their ranks continue to grow.
According to FRANdata, multi-unit operators with more than 50 units have surged by 112.3% since 2019. Larger consolidation is expected to continue with this type of investor. And it appears tough economies are not too tough for this bunch.
That makes many M.U.M.B.O.s blue-ribbon franchisees of a different breed. It also puts them on the radar of franchisors looking to expand at a fast clip, often awarding them multiple deals at once. When you hear about three-packs with a brand, the hunt for experienced investors is on point. Do that enough, and suddenly, it’s no surprise to see 10- or 20-unit deals rev up a brand’s growth.
According to the 2024 Franchising Economic Outlook, franchise establishments are predicted to increase by 15,000 units this year. And thanks to multi-unit and multi-unit/multi-brand franchisees, that won’t mean 15,000 rookies.
Why the rush and fuss?
Here are three reasons M.U.M.B.O.s seem to move at break-neck speed.
1. Money
The Federal Reserve has held interest rates steady since June of 2023. And lending is incredibly tight. Members of the Federal Open Market Committee, the central bank’s rate-setting panel, said again on July 31 that they will hold the federal funds rate at 5.25% – 5.5%, leaving it at the highest level in 23 years.
While cuts could come in the near future, the credit market continues to be a hurdle for average small business owners. Meanwhile, M.U.M.B.O.s are anything but average. Instead, they are more experienced franchisees in a variety of businesses across multiple brands. They have deeper pockets and proven results amidst the risks and rewards. Their capital reserves can allow for faster growth than brand-new investors in this economy. Similarly, their strong history across multiple locations and a variety of brands means this is not a one-trick pony. And that’s attractive to lenders at large.
This perceived safe investor often leads to discounts on franchise fees for multiple deals from franchisors as well. Brands have been known to run specials, such as royalty breaks, to meet or beat deadlines for quick openings, too.
2. Industry Prowess
Many M.U.M.B.O.s start out with one brand and a passion to succeed. Over time, that passion for a brand becomes a passion for the industry. We see that in restaurants, home services, travel and hospitality and more.
A proven restauranteur might begin with one quick-service restaurant, expand to multiple locations, and soon add other fast-casual brands in a complementary space. The ability to run great crews, serve delicious food, and create happy customers becomes a transferable managerial skill and a common thread for all.
Similarly, a home services expert can begin in one service trade and then look for more ways to address multiple pain points with the same target customer. For example, a plumbing franchise might spawn an interest in a restoration franchise that soon grows to drywall repair and more. Wouldn’t you know it? At every step in this journey, there’s a franchise brand with a solution. Before long, a small-business owner becomes a M.U.M.B.O. in all the ways to help make a home sweet home again for a growing fan base.
Likewise, there’s the home-away-from-home expert. The number of travel and hospitality franchisees now includes hoteliers championing everything from budget brand motels to four-star resorts. Franchisors attracting that kind of investor can assumably rest a little easier with that expertise on the roster.
An increasing number of M.U.M.B.O.s are also jumping into new industries altogether. Hotel owners moved into fitness chains. QSR franchisees have ventured over to health and beauty brands. Salon owners have turned to chiropractic services. The opportunities are endless.
Available territories, however, are not.
3. Available Territories
While single-unit franchisees keep investments geographically close to home, multi-unit franchisees go where the markets dictate. Regardless of the franchise concept, the land grab is key. M.U.M.B.O.s are focused as much on location as they are on the brand itself. They are fixated not only on the type of business but also on where exactly they get to run it. What address? What city? What state? And where next?
Owning a brand can evolve into owning a market. That is until a territory is sold out and a proactive and experienced investor looks to other franchise brands that are available. Then, alas, if the backyard is full, a franchisee turns to other places across the larger map where growth is still untapped.
The end result is an operator that morphs an investment into multiple locations for a brand, multiple brands in multiple markets, and maybe multiple industries, products and services altogether.
Regarding the economic outlook, Matt Haller, president and CEO of the International Franchise Association, said, “Even in the face of macroeconomic factors like high inflation, labor availability, and the cost of capital, franchised businesses continue to outpace the growth of the broader economy.”
Data shows that multi-unit franchisees are fueling much of that pace, too.
