5 Tips on How to Diversify Your Franchise Portfolio

One of the benefits of franchising is that you don’t have to stick to one franchise. Many franchise groups allow franchisees to invest or buy more franchises. However, it’s important to do it strategically. You need to know how to diversify first. Plus, you need to have money saved before launching a new franchise. And if you want to know how to diversify your franchise brands, here’s how you can do it.

Advantages of Diversifying Your Franchise Portfolio

• Increased ROI, revenue, and profits
• More resource sharing (e.g., employees and inventory, if applicable)
• More opportunities for cross-promotion
• Get more experience in operating or managing other industries
• Protect your investments
• If needed, sell one of your franchises at a higher price

Five Ways How to Diversify Your Portfolio

1. Choose From the Same Franchise Group

You can diversify your franchise portfolio by investing or buying from a franchise group. Most franchise groups allow you to purchase various franchises to expand their growing brand. With this option, you don’t have to look anywhere else. Plus, this is ideal if you want to franchise different brands under one industry.

2. Buy More Units with the Multi-Unit Option

Similarly, you can diversify your portfolio by franchising multiple units of the same franchise. This is an easier and better option for most entrepreneurs and investors. After all, many franchisors appreciate that you want to franchise multiple units. FAT Brands and Focus Brands are two franchisors that allow multi-unit franchising. 

If you franchise multiple units, it will be easier for franchisors to approve your application. Plus, you get easier and faster access to funding.

3. Try Different Industries

Most franchise groups would have the same type of franchise, like quick-service restaurants or home repair franchises. However, you can diversify by investing or buying from other franchise groups. Make sure that it’s not competing with your current franchise. Plus, don’t forget to ask your franchisor if you can franchise other brands not coming from their group. This way, you will still honor a non-compete clause that your franchisor may or may not have in place.

4. Select A Part-Time or Absentee Franchise Model

Do you want to buy another franchise but can’t commit fully to another one? You can choose a part-time or absentee franchise. This will allow you to run your franchise on your own time, hassle-free, without being present in your other franchise. With this option, you can entrust operations and management to a franchise partner or someone you can trust to keep the franchise running smoothly.

Here are some options to consider:

• Tutor Doctor
• Fetch
• DonutNV

You can check our list of the best absentee franchises here!

5. Go with Your Passion

Another way to diversify your portfolio is to go with your passion. Franchising was probably your option to start a business. But the great thing about franchising is you don’t have to stick to one unit. If there’s a franchise that’s similar to your passion, that’s one way you can grow your portfolio. Plus, you get to spend time operating or managing a business that you’ll love.

Next Steps in Growing Your Franchise Portfolio

Now you know how to grow your franchise portfolio, here’s what to do next:

• Contact the franchisor on how to get more units or start a new franchise in a different industry
• Create a business plan
• Prepare your financials with your bookkeeper and accountant
• Consult with your lawyer regarding legalities
• Find the right fit for your next franchise and make sure to train them

Diversifying with A Franchise: For Investors

If you’re an investor, you can also diversify your portfolio through franchising. Your risks are lower when you invest in a franchise. Plus, most franchises are recession-resistant too. But as an investor, will you also own a franchise? Yes, you will own the franchise. However, since you are an investor, you might work on other ventures, allowing you only to focus on one venture.

Which Franchises Can Help You Diversify Your Portfolio?

Here are some brands to get you started:

• Budget Blinds
• Stop Restoration
• Phenix Salon Suites
• Kiddie Academy
• Smoothie King
• MY Salon Suite
• Phillips Seafood Restaurants

Final Thoughts

Diversifying your franchise portfolio requires you to take risks. This means you have to buy multiple franchises or various franchise industries to meet your financial and personal goals. After that, you also have to prepare yourself as you start diversifying your portfolio. This will require you to spend, but it will be worth it once it’s running. You have to make sure that you will have enough funds to secure more franchises. Plus, you have to commit to these franchises, whether in a full or part-time capacity.