By Keith Gerson, CFE

Multi-unit development has become the crown jewel of franchising. Every franchisor wants them. Every sales deck celebrates them. And on paper, multi-unit owners look like the safest bet for long-term growth.

But here’s the truth few like to admit: most multi-unit expansions stall. In fact, after auditing hundreds of franchise systems, I’ve seen that close to 70% of franchisees who sign multi-unit agreements either never build out their full territory or underperform across their additional locations.

It’s not because they didn’t believe in the brand. It’s because the system wasn’t built to support the complexity of scaling beyond one unit.

Let’s break down where multi-unit growth really fails—and how to design your system to avoid being part of that 70%.

The Silent Killer: Overestimating Capacity

The biggest mistake franchisors make is assuming that a great single-unit operator will naturally succeed as a multi-unit owner.

I’ll give you an example. A casual dining franchisor I worked with celebrated when one of their top-performing owners signed a 5-unit development agreement. The franchisee’s first restaurant was profitable, customer reviews were strong, and turnover was low.

Fast forward two years: only three of the five units had opened. The first was still thriving, but the second was break-even at best, and the third was bleeding cash.

What happened? The owner was an excellent operator, but he never learned to be a leader of managers. Running a team of 30 inside one location is a completely different skill set than leading 150 people across five locations.

Where Multi-Unit Franchising Breaks Down

Based on decades in this industry, I see three recurring breakdowns in multi-unit development.

1. The “Corporate Executive” Trap

Many multi-unit franchisees come from corporate backgrounds. They’re used to managing teams and budgets, so they feel confident signing big agreements.

The problem? They underestimate the grind of local execution. Corporate leaders often assume they can “manage from a distance.” But franchising demands local presence—especially in the first 12–18 months of a new unit. When owners aren’t visible, culture and customer experience suffer.

2. The Cash Flow Crunch

Opening multiple units requires far more than the initial franchise fee and buildout. Most systems underestimate working capital needs for units two and three. By the time a second location opens, profits from the first are often being siphoned off to cover payroll or marketing. That slows growth and creates burnout.

One retail system I worked with required franchisees to show proof of funds for the first buildout, but not the second. Three years later, half of their multi-unit agreements had collapsed because franchisees simply ran out of capital.

3. The Leadership Gap

The number-one predictor of multi-unit success isn’t market selection or brand strength—it’s leadership. Single-unit operators thrive because they can personally oversee every detail. Multi-unit operators must learn to hire, develop, and retain managers who can replicate success without them present.

Franchisors who fail to train franchisees in leadership development are setting them up for disappointment.

The Framework That Actually Works

So how do you prevent your brand from becoming another stalled multi-unit story? Here’s what I call the Multi-Unit Success Framework.

Phase 1: Pre-Commitment Vetting

Before selling multi-unit agreements, put candidates through a readiness assessment.

  • Financial Readiness: Can they fund the second and third locations without draining profits from the first? Require proof of access to working capital.
  • Leadership Readiness: Have they managed multiple managers before? Ask for examples. If they’ve only led small teams, they may not be ready.
  • Support Network: Who’s in their corner—spouse, partners, advisors? Scaling requires a personal support system as much as a financial one.

This is where many franchisors look the other way in order to close the deal. But the cost of failed units later dwarfs the benefit of an early franchise fee.

Phase 2: Development Playbooks

Every successful multi-unit brand I’ve worked with has codified development into playbooks.

  • Site Selection: Don’t let franchisees “go it alone.” Build a checklist that aligns demographics, traffic counts, and competitor presence.
  • Hiring Pipeline: Require franchisees to start building a manager pipeline before the second location opens.
  • Cash Flow Projections: Provide a template that forces owners to model cash flow through the first 12 months of each new location.

Without a playbook, franchisees make decisions reactively. With one, they scale systematically.

Phase 3: Leadership Training for Franchisees

This is where most franchisors completely miss the mark.

Operators don’t automatically know how to lead managers. They need training in delegation, accountability, and culture replication. One brand I worked with launched a “Franchisee Leadership Academy” focused entirely on developing these skills. Within three years, their multi-unit completion rate jumped from 55% to 82%.

Phase 4: Ongoing Strategic Reviews

Scaling is messy. Franchisees need structured checkpoints.

Quarterly business reviews are not just for compliance—they should include:

  • Expansion timeline progress
  • Manager development tracking
  • Market-specific adjustments based on local data

This keeps franchisees accountable, and it gives franchisors a clear line of sight into where expansion is likely to stall.

Measuring Success: The KPIs That Matter

If you want to know whether your system supports multi-unit growth, track these numbers:

  • Buildout Completion Rate: % of signed agreements that actually hit the unit target.
  • Time to Second Unit: Average months from first opening to second opening.
  • Manager Retention Rate: % of managers retained through year two across multi-unit operators.
  • System Completion Rate: % of franchisees who fulfill their full development schedule.

Healthy systems consistently see 75–85% completion. If you’re below 60%, you have a systemic engagement or support problem.

Why This Matters More Than Ever

Private equity, lenders, and sophisticated investors are scrutinizing multi-unit performance like never before. A brand with high multi-unit failure rates won’t just struggle to raise capital—it will also find it harder to attract new candidates. Word travels fast in the franchise world.

Get this right, and you don’t just grow faster—you build credibility in the market. Your brand becomes the kind of system investors want to back and operators want to expand with.

The Bottom Line

Multi-unit development isn’t the easy growth lever most franchisors imagine. Done poorly, it bleeds capital, burns out franchisees, and erodes brand reputation. Done well, it creates the kind of stable, scalable growth that separates leaders from laggards.

The choice is clear. Either treat multi-unit development as a sales win and hope for the best, or build a system designed to support it every step of the way.

The brands that thrive in the next decade won’t be the ones with the most signed agreements. They’ll be the ones with the most completed ones.

One step at a time.

Ready to turn your multi-unit agreements into actual completed territories? Don’t let your expansion strategy become another stalled statistic. Let’s build a system that supports franchisees through every phase of growth—from vetting to buildout to sustainable scaling.

👉 Schedule a free 30-minute consultation with Keith Gerson today and discover how to transform your multi-unit success rate from 70% failure to 80%+ completion.
https://gersonadvisoryservices.com/contact-us/

Keith Gerson, CFE, is a globally recognized franchising expert with 50 years of experience. As President & CEO of Gerson Advisory Services, he’s known as a super-connector, trusted advisor to top franchisor CEOs, and thought leader whose webinars, articles, and the FranConnect Franchise Sales Index Report have earned him a massive industry following.