Owning just one franchise can be enough work; owning two or more can be a great deal of work. It can also bring many rewards. Owning several successful franchises can mean bringing in a lot of income. It can mean huge success in the business world. If you've got a franchise and you're considering adding to your business by opening more franchises, one question to consider is whether you are going to open more of the same franchise or are you going to buy a franchise with another company. Before you jump into buying another franchise, you need to be aware of the rules, if there are any, of opening competing franchises.
Can You Own Competing Franchises?
If you own one franchise and want to buy another, you won't have a problem doing so as long as the second franchise you buy isn't in competition with the franchise you currently own. There is no issue involved when you own non-competing franchises. The issues arise when you own one franchise, a food franchise, for instance, and you want to open another food franchise. The issues can compound when those food franchises serve the same types of foods. This creates competition for the franchise and you're even competing against yourself, which can pose a threat to your franchise efforts.
Before you consider opening a competing franchise, the first thing you want to do is check the non-compete clause in your franchise agreement. The franchise agreement will likely spell out in no uncertain terms what the rules regarding opening a competing franchise are. This will give you a place to start. Most franchise agreements include a clause that requires a franchisee to devote their full attention to the franchise. Many franchise agreements also explicitly prevent franchisees from having any business that will be in competition with their franchise. This same provision restricts or prevents a franchisee from having any franchise agreement with a brand the franchisor feels is in competition with their brand. One notable exception may be if the two franchise are completely different or if they complement one another. If there are such clauses in your current franchise agreement, you will likely not be able to operate a competing franchise. Some franchisors may not restrict you from operating a competing franchise as long as the competing franchise is not within a specific distance.
Owning competing franchises can be beneficial in that it gives the franchisee the opportunity to offer variety and expand customer base. Cross marketing is often an approach taken by franchise owners who own competing franchises, as well as shared resources (such as employees). Again, most franchises you buy will have strict guidelines that prevent some of these benefits.
In truth, the benefits of owning competing franchises can be overshadowed by the negative aspects. To be able to exploit the complementary possibilities of your competing franchises, it's important to ensure you don't violate the contractual, statutory and other legal rights of any of your franchise agreements.
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