Why it matters:
- The opportunities in multi-revenue franchising range the gamut in a variety of industries.
- Recent studies reveal that businesses with multiple revenue streams have 2.5 times better survival rates during economic downturns.
- These businesses grow three times faster than those with just one source of revenue, according to Apex Liberation.
Dustin Myers is the poster boy for multi-revenue franchising. Over the past nine years, he’s made over $100 million in sales from six Batteries Plus stores in Pennsylvania and Maryland with gross profit margins above 50%.
The concept is simple: Don’t rely on one source of income. Instead, garner sales from multiple lines of business to boost sales and profits and improve financial stability. That’s because when one line of business faces reduced demand, another line of business can help offset the shortfall. It’s a unique franchising strategy more entrepreneurs are adopting in these challenging economic times.
“This franchise model helps a business owner survive the ebbs and flows of market demand for their various products and services,” Myers told CO—.
In his case, each of his franchises has three key revenue streams: in-store battery and lighting sales for consumers; a B2B business selling batteries and servicing the power needs of public transit systems, hospitals and medical centers, municipal facilities, and corporations; and a key fob and device repair service for phones, tablets, and other devices for both consumer and commercial clients.
Currently, retail sales and product servicing account for 40% of about $15 million in annual revenues, and the commercial business accounts for 60%. The franchise’s B2B client roster includes big names like Johns Hopkins Hospital, Maryland Transit Authority, Starbucks, and Walmart.
Not only does this model help you make more money in a variety of ways, it also helps build brand value.Robert Branca, a Multi-unit Operator of Dunkin’ franchises
The appeal of multi-revenue stream franchise models
Myers’ success demonstrates how resilient his franchise business has been over the years despite various economic cycles and challenges. That’s not surprising. Recent studies reveal that businesses with multiple revenue streams have 2.5 times better survival rates during economic downturns and grow three times faster than those with just one source of revenue, according to Apex Liberation.
Some franchise owners learn this the hard way. Stephen Lutfi can attest to that. Over the past 30 years, his family built a chain of 250 Arby’s, Captain D’s, Church’s Texas Chicken, Jack in the Box, Little Caesars, Sizzler, TGIFridays, and Taco Bell restaurant franchises across 11 states: Arizona, California, Colorado, Indiana, Kansas, Louisiana, Missouri, Nevada, Oregon, Texas, and Washington.
Although it was a diversified portfolio of restaurant brands, the franchises all took a big hit during the pandemic shutdown when in-store dining went on hiatus. And they all suffered from the inflation, supply chain issues, and wage hikes that hit the restaurant industry. The confluence of these and other factors forced the family to sell 100 of its units.
It was a painful lesson. As he explained, “When you are one dimensional you are held hostage by … whatever challenges befalls that business that at that time.”
Since then, Lutfi has diversified the company’s franchise business and has purchased 16 Batteries Plus franchises in Phoenix and Tucson. Plans are to keep adding more through acquisition and organic growth. He says the attraction is the franchise’s multi-revenue model, and its lower startup and real estate costs compared to restaurants. Depending on location, inventory and construction costs average $350,000, and royalty and marketing fees are 5% and 4% respectively.
[Read more: How 3 Franchise Entrepreneurs Built Multimillion-Dollar Businesses]
Dunkin’ franchise owner: ‘Not only does this model help you make more money in a variety of ways, it also helps build brand value’
The opportunities in multi-revenue franchising range the gamut in a variety of industries and many entrepreneurs are taking notice.
“Not only does this model help you make more money in a variety of ways, it also helps build brand value,” said Robert Branca, a Multi-unit Operator of Dunkin’ (formerly Dunkin' Donuts) franchises who serves on the company’s national brand advisory. That’s why more franchisors are adopting this approach. At Dunkin’, revenue is garnered not just from the royalties and fees from franchise stores but also from sales of coffee and K cups at supermarkets and other retail stores, and then shared 50-50 with its thousands of franchise operators in the United States.
Many entrepreneurs also like the fact that these types of franchise businesses can better weather the seasonal nature of a business.
That is one factor that attracted Alejandra Cantu, a Nutritionist, and Lili Lezama, a Psychologist, to partner and buy a mobile Snapology franchise in San Antonio, Texas, 10 years ago. Both professional moms wanted to run a business focused on education that could also enrich the lives of their own small children they could bring to work.
They liked the fact that Snapology offers an educational enrichment program for children aged 3 to 14 that teaches science, technology, engineering, art, and math (STEAM) in various formats providing at least four revenue streams: enrichment and after-school programs during the school year; summer and holiday camps, and other seasonal programming; birthday parties; and special events like field trips.
“This allows us to bring in monthly revenue year-round and not be adversely affected when school is on summer and holiday breaks,” said Cantu, who notes she now services 35 schools in San Antonio and partners with school districts and private schools in San Antonio.
Over the years, partnering with the community has been key to the franchise’s success. Cantu and her business partner participate in school fundraising activities and science fairs. They also help raise grants for disadvantaged kids who cannot afford to pay for Snapology programs. Those efforts have paid off. After making an initial investment of $50,000 to buy their franchise and get it up and running, Cantu and Lezama now make $250,000 in annual revenues.
According to Cantu, “You cannot sit idly behind a desk to grow your business. To succeed you must forge relationships with schools, businesses and other organizations in your community that will want to support your efforts.”
[Read more: How CEOs Who Became Influencers Are Supercharging Company Sales]
Micro-winery franchise drives sales via five lines of business
In addition, you must have good management and sales skills, said Batteries Plus’ Myers. Since you are pursuing multiple lines of business, you must be able to pivot quickly to address sales growth opportunities that are constantly shifting.
Angela Zuba, a Restaurateur and Vinter who owns Waters Edge Winery & Bistro Kalispel, a micro-winery franchise located in Montana, agrees. She is constantly busy overseeing five lines of business: wine sales, a restaurant, offsite catering, a wine club, and in-house events. The diversified revenue streams have helped her grow annual revenue to around $700,000, of which 70% is from wine sales and 30% from all other lines of business.
“We have done well from day one despite launching during the pandemic,” said Zuba, who noted she built each revenue stream one at a time and moved on to launch and grow another line of business once sales were on a healthy pace.
As she explains, the community loves the uniqueness of her business, which combines European-style winemaking with rustic Montana. The franchise imports over 50 varietals from around the world and then makes unique wine blends at its 1,500-square-foot facility. These include the “Ruby Crown Kinglet,” a Chilean Carmenère blended with an Old Vine zinfandel from Napa Valley; and the “Bohemian Wax Wing,” an Italian pinot grigio blended with a Chilean sauvignon blanc.
Patrons can come for wine-tasting, to eat at the bistro, or to buy bottles of wine, which can be custom-labeled. Wine enthusiasts can also join the Waters Edge’s wine club and have corporate events, parties, and weddings at the winery. In addition, Zuba hosts wine parties at people’s homes, where she educates guests about wine and the foods that can be paired with them.
Empowering a great team of workers and managers who oversee each line of business has also been key to her success. Letting them take ownership and implement their own ideas for each business makes all the difference, she said. “I make it a point to reward them for their efforts in helping to grow sales by celebrating them publicly on social media or through team events like white-water rafting trips,” Zuba said. “It’s a great way to inspire the team and boost employee loyalty.”
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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