What Are Multi-Unit Franchises (And How to Do It Right)

It’s not unusual for a restaurant franchisee to start small. While investing in a franchise can be a smart move, it isn’t risk-free, and it generally requires a hefty investment of time and capital. Jumping straight into multi-unit franchise ownership doesn’t make sense for everyone, especially if you’re new to the restaurant franchising game.

Multi-unit franchising can be a fast-track to growth and success, but it comes with a few “ifs” — if you’ve got the operating experience; if you’re working with an established, proven brand; if you’ve got the resources to do it right. And keep in mind: Transitioning from one unit to two (or three, or 10) typically requires big changes to your management team and staff, your operations and processes, and your role as the franchise owner.

If you’re thinking about amplifying your success through multi-unit franchising, here’s everything you need to know.

What is a multi-unit franchise?

A multi-unit franchise model allows franchisees to operate more than one restaurant unit in a given territory.

A franchisee may own the right to operate multiple units of the same brand or operate restaurants for several different franchisors. Guillermo Perales, CEO of Dallas-based Sun Holdings, operates more than 1,000 stores, including 293 Burger Kings, 150 Popeyes, 94 Arby’s, and 18 Krispy Kremes.

Multi-unit doesn’t necessarily mean thousands of restaurants like Perales. Today, 54% of franchises are multi-unit operations, compared to single-unit owners (46%). Breaking that down further, 30% own between two restaurants and 30. Only 5.3% of owners make it past the 100-unit mark.

As long as a franchisee is running more than one store, they qualify as a multi-unit franchisee.

How does a multi-unit franchise work?

Multi-unit franchises scale up operations from one restaurant to two (or many). Typically, this means a multi-unit franchise owner steps into a business development or strategic role rather than a hands-on manager of each restaurant unit.

This also means the multi-unit franchise owner is responsible for developing and running each unit themselves. While they may visit each location to meet with staff or check on operations, more likely they hire an experienced management team to run each location or several locations at a time.

What are the benefits of being a multi-unit franchisee?

Multi-unit franchises exploded in popularity in recent years for restaurant owners — from 2010 to 2018, businesses saw a 23% increase in entry-level multi-unit operators. It’s no surprise why, once you consider the benefits:

More income. More locations mean access to more revenue streams, especially when expanding into multiple brands.
Lower operating costs. The more locations you open, the more you can leverage economies of scale, sharing back-end staff like accounting, marketing, and operations across multiple locations and decreasing your overhead.
Diversified income. Separate locations in a given territory allows you to diversify your income streams and spread risk across multiple investments. If there’s construction in front of one location that decreases traffic, for example, your other units can pick up the slack.
Relationship-building: Without franchisees, major restaurant chains wouldn’t function. The more locations you open, the stronger relationship you build with a brand — so everyone wins the more profitable you are.

What is a multi-unit franchise agreement?

Franchisees expand in two different ways: starting with one unit and opening more franchise locations over time or signing a multi-unit franchise agreement at the outset. The multi-unit franchise agreement details the rights and obligations of each party (in this case, the franchisor and the franchisee.)

When you sign a multi-unit franchise agreement, you determine:

How you will open additional units. Are you taking over existing locations or building new ones in your territory, and if so, where? This is part of your area development agreement, which determines guidelines for choosing new sites and franchisor approval.
The timeline for opening additional units. Most multi-unit franchise agreements outline a prescribed schedule for opening subsequent units, often on an annual basis. How long will you be managing these units, and at which points will you open new ones?
Your territory. Franchisors grant a specific geographic area for your business to operate in. Some grant more than one territory, if that’s what you’re looking for, but most franchisees operate in one area at a time.
Intellectual property. This includes training, menus, branding colors, guidelines for marketing and other materials, and what rights franchisees have to make changes. In many QSR agreements, the franchisor retains all rights to recipes and menu items offered and changes are not allowed.
Profit, fees, and insurance: The revenue-sharing model you agree to, what fees the franchisee must pay each year to the franchisor for the right to operate, pricing for menu items, and of course, insurance and other costs of operating a business in partnership together.

Franchisors legally have to give you 14 days to review any multi-unit franchise agreement, so read through it carefully with your legal team before making a commitment.

Types of multi-unit franchise agreements

There are two kinds of multi-unit franchise agreements:

Area development agreements: The more common of the two, this gives franchisees the right to open a certain number of franchise units in your territory over time
Area representative agreements: This creates a sub-franchisor relationship, which allows the franchisee to open and operate locations but also sell those franchises to others within that territory.

With multi-unit franchises, it’s less about the day-to-day restaurant operations and more about your overall business strategy. As you consider how you plan to expand your restaurant business, think about how many units you want to acquire, which brands you want to partner with, and what types of agreements make the most sense for you.

Opening a multi-unit franchise?

Whether you have one unit or 50, restaurant franchisees can use instant tip payment technology to minimize the risk, hassle, and hidden costs of paying out cash tips. If you’re not already using Kickfin, get in touch with us today for a free demo!

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Industry Trends

How the 2024 Presidential Election Could Affect Taxes for Tipped Employees

It’s an election year, in case you haven’t heard! 😉 This one has major implications for tipped employees — specifically, when it comes to taxes.

It’s no secret that our Democratic and Republican candidates are running on very different platforms. But when it comes to tip regulations, Vice President Kamala Harris and Former President Donald Trump actually both support reducing taxes on tips.

A little context on taxes and tips

We’re just going to state the obvious: For the average American, tax reporting can be pretty, pretty confusing. For the millions of employees working in tipped occupations — well, that creates another layer of uncertainties.

(Do I have to report my tips? Do have to report my cash tips? Will anyone know if I don’t report my tips? What happens if I don’t accurately or fully report what I earned?)

Historically, there’s been a trend of hospitality employees underreporting cash tips to prevent higher tax burdens. And while this may reduce what employees owe Uncle Sam in the moment, there can be downsides: e.g., if they find themselves eligible for unemployment, if they’re trying to qualify for an auto loan or mortgage, etc.

However, that urge to underreport could be relieved in the near future, given the tax code changes both of our presidential candidates have proposed. The TL;DR: Both Trump and Harris have voiced their intention to relieve some of the burden on tipped workers in restaurants, bars, hotels, and other service positions.

Here’s a quick summary of each candidate’s plan, as well as some potential impacts for restaurant employees.

Trump’s plan for tipped employees

Trump shared his plan to reduce tipped income tax burden at a rally in Las Vegas — fitting for a city that’s built on the gig economy. Nevada is home to the highest concentration of tipped employees who work in the many hotels, casinos, and restaurants that millions of tourists flock to annually.

During the rally, the former president announced that he would make tipped income exempt from federal income tax, stating it would happen “right away” when he takes office.

Since speaking at the rally, Trump has not yet clarified what this would mean for tipped employees. Many servers want to know if this is an exemption just on federal income tax or if the proposal includes payroll taxes (social security and Medicare).

Harris’s tip tax proposal

Harris also took the opportunity to speak on her tipped income policy while visiting Nevada. Much like Trump, she knew she’d have a captive audience when it comes to tipped earnings.

Her proposal promises to exempt tipped income from the federal income tax, but she has made clear that tips will still be subject to payroll taxes. While not yet confirmed, campaign insiders say Harris is considering placing some guardrails on her plan — like a caveat that the tax exemption only applies to employees earning less than $75,000 per year.

Is one plan better than the other?

In short: probably not. (Most service and hospitality workers do not earn above the $75,000 threshold that’s been suggested by the Harris campaign.) So either way, servers, bartenders, and hospitality staff can expect to see a lower tax burden during the next administration.

But what does that look like in practice?

Most tipped employees aren’t receiving their tips on payroll — they’re walking out of every shift with their earnings for the night, deduction-free. Instead, the taxes are paid on payroll out of their hourly earnings, which is why many servers get $0 paychecks every two weeks. With a reduced tax burden, most servers will see the difference in higher paychecks.

On the other hand, economists are wary of the impact of eliminating taxes on tips, citing the reduced funding for social security and Medicare. And with so much negative sentiment around “tipflation” these days, experts also speculate that a reduced tax burden may result in even more hesitance at the tip screen.

Increasing minimum wage

We’re closely following campaign promises about an increase to the minimum wage — especially in regards to the tipped minimum wage and the tip credit.

Minimum wage earners have been eyeing an increase, noting that the federal minimum wage of $7.25 per hour hasn’t increased since 2009, and servers, bartenders, and other tipped employees have been earning $2.13 per hour for over 30 years. An increased minimum wage paired with the reduced tax burden could make a major difference for service workers trying to keep up with the rising cost of living.

In the Harris camp, removing tax on tips is just part of the plan to take some pressure off service workers. While Harris hasn’t shared a detailed plan for bumping up the minimum wage, she has indicated that she would support an increase.

In previous election cycles, Trump stated that he would consider a minimum wage increase, but he has not shared his opinion on the matter during the 2024 presidential campaign.

Of course, we’re a ways out from any real policy changes actually shape — but if you’re looking to make your tip management process less taxing in the interim (see what we did there?), Kickfin is here for you! Check out how you can use Kickfin to auto-calculate tip pools and send payouts directly to employees’ bank accounts in seconds.

Restaurant Management

Top 4 Ways to Protect Your Restaurant from Cash Shrinkage

No matter what industry you work in, there’s always a risk for shrinkage and theft. Ninety-five percent of all businesses experience theft in the workplace, and up to 75% of employees have admitted to stealing from their employer.

Most of the time, it’s not intentional or malicious. For restaurants, it could be something as innocent as giving your friends a free drink or asking the kitchen for food and neglecting to ring it in.

But when you have a lot of employees handling cash day in and day out, it can be very tempting for someone to take advantage of systems and pocket extra money at your expense. To make matters worse: because cash is hard to track, it can be tricky for operators to put their finger on exactly what’s happening — at least, before it starts to impact your bottom line.

While cash shrinkage can jeopardize your business, operators do have the power to protect their restaurants. Ultimately, it comes down to having the right processes, systems and partners in place.

Here are 4 things you can start doing today to protect your restaurant from cash shrinkage.

1. Create a culture of trust with employees

Most people want to come to work, do their best, and make an honest living. Creating an environment where your employees trust you with their earnings should encourage them to also be responsible with company assets, including cash.

Of course, it starts with doing your due diligence when building out your team. That means interviewing new hires in person, asking the right questions, and always checking references.

But the fact of the matter is that even good people can make poor decisions, especially when they’re struggling. As an employer, there are things you can do to keep your staff from ever getting to a place where they feel the urge or need to steal. That includes:

Paying a fair and competitive wage
Paying wages on time, in full
Giving people instant access to their earnings
Offering employee benefits and perks if possible
Adhering to federal, state and local labor/wage regulations, especially as they relate to tips

Bottom line: If you show that employees you take their financial well being seriously, it can foster an environment of mutual respect, making employees less likely to consider theft as a reasonable (or justifiable) option.

2. Minimize cash touchpoints

It’s simple. Less cash on hand = less opportunity for cash shrinkage.

In the unfortunate case that a high-ranking employee is stealing from your restaurant, cash tip outs make it much more difficult to catch and trace. Anyone with access to cash registers and safes has the opportunity to take a few extra bills — and you may not notice until well after the cash is pocketed and spent.

Instead of locking up cash and making only a few employees responsible for the massive task of paying out tips, take advantage of new technology that eliminates cash from the tip out process. Fewer people will need to manage cash, which adds one extra layer of security against theft.

Bonus: cashless tipping vendors like Kickfin give your employees more flexibility with their earnings. They can opt for tips to be sent directly to their bank or to have them put on their payroll check, empowering employees to make their own financial decisions.

3. Create a digital paper trail

The trouble with cash is the inability to track it. Half the battle is realizing that the cash is missing; and once you know it’s gone — well, now what?

Digital gratuity management software makes it easy for restaurant operators to create a digital paper trail for all tip payouts. You’ll be able to identify any improper payments, who they went to, and who authorized the payout — removing a major security soft spot.

Not only will you feel more secure, but your loyal employees will thank you for making tip outs much easier.

4. Select a secure tip management partner

Removing cash-on-hand is a great first step, and it should make any potential theft traceable back to the person responsible. But wouldn’t you rather prevent theft before it happens?

If you’re ready to bring your gratuity management into the future, make sure to thoroughly vet your options — because not every digital tip out software has strong protections against theft.

That’s why Kickfin has optional guardrails that can mitigate your risk of employee theft.

Maximum tip amounts: Limit the amount that can be issued in any individual payout.

Role policies: Create policies to limit who can receive payments by role type, and limit who can send payments to themselves.

Multi-factor authentication: Set your own rules to require MFA at any point, whether at every login or once a month.

Payment interval approval: Trigger a requirement for second approval for an employee’s first payment or their first payment in a determined number of days.

Payment velocity approval: Trigger a requirement for second approval when an employee receives a determined number of payments within a certain interval.

For our POS integration partners, Kickfin can also put guardrails around your tip calculation policies to prevent fraud. While we offer the ability to send payments through manual entry, spreadsheet upload, or using our tip calculation software, integration users can disallow manual and upload payments to prevent any ad hoc payouts.

Integration users can also lock in their tip calculation rules, so that only certain users can make changes to the calculation policy.

How Kickfin helps in the event of fraud

Even without the temptation of cash in the safe, where there’s a will, there’s a way.

If you find yourself in a regrettable situation with an employee, your tip management partner should be there to back you up. Thankfully, our platform tracks each payout which will help you identify irregularities and the source of the problem.

The Kickfin team will always be there to support our partners who experience security breaches.

Check your Kickfin security settings

Do you want to make sure you have the most up-to-date protections on your Kickfin account? We’ve got you covered. Reach out to your Kickfin customer support team to ask about a free security audit, where we’ll go over your current settings and offer guidance on how to minimize your risk.

Not yet a Kickfin user? Find out more about our platform and security settings with a demo today.

Restaurant Management

4 Ways to Save on Restaurant Labor Costs with Kickfin

In the restaurant industry, profit margins have always been tight — and these days, they’re only getting tighter.

Running a restaurant is a labor intensive business. You need a strong back of house team to push out food, front of house workers to greet and care for guests, and managers to keep everyone in check. Naturally, labor is one of the most significant expenses for restaurant operators. In order to keep costs reasonable for customers, even a slight overage on labor can break your budget — but thankfully there are levers you can pull to reduce labor costs.

If you want to secure your business’s financial future, you’re going to need to streamline scheduling practices and keep a close eye on labor costs… without frustrating employees who want more shifts.

Don’t worry: you can turn to traditional wisdom, sales forecasting, and emerging restaurant technology to make sure that you stay on budget.

Here are a few ways you can save on labor costs at your restaurant:

1. Rethink the schedule

Obviously, the most straight-forward way to cut labor costs is to reduce the number of people you schedule on a given night.

We get it — you don’t want to see hour-long ticket times and poor guest experiences. But you might not need as many folks on the line or servers on the floor as you think — at least, not all the time.

Staffing and scheduling isn’t a perfect science, but there are some tactics operators should test if they’d like to “right size” every shift — including:

Analyze your daily schedule. Don’t make assumptions about your peak times and slow periods. Analyze sales trends and let the data be your guide.
Anticipate seasonal trends. If you’re in a college town, don’t wait until your servers are twiddling their thumbs in July to implement a new summer schedule.
Let your seasoned staff shine. Your veteran employees likely thrive on those super busy nights when they’re running on pure adrenaline (and earning way more in tips). Consider giving more experienced workers more responsibility — assuming they’re willing and able — and you might be able to get away with fewer people on a shift here and there.

>> Learn about scheduling software that helps you manage labor and engage with employees

2. Assess and address productivity

Are you making the most of the team that you already have? There are a few ways you can identify your highest-producing employees and make the most of their success:

Evaluate employee performance. Most employees want to be successful; observe your team and analyzes things like sales per labor hour, table turnover rate, and tip volume to get a sense of your strongest players and those who could use more training (and bonus: this can reduce turnover and boost team morale)

Provide incentives. Create a fun bonus system that rewards strong performance and high levels of productivity. You can use data from the previous data point to set goals.
Cross-train employees. Training your staff to handle multiple roles – or hiring folks with vast service experience – offers flexibility for scheduling and can reduce your need for additional hires.

3. Don’t pay employees to wait for their tips

No, we’re not saying to cut all of your servers early (no matter how much they ask).

But, you can send your servers on their way much quicker when they don’t have to wait around for managers to count out cash tips. Once they’ve finished their sidework, servers can clock out and see their digital tips sent directly to their bank account, instead of hanging around on the clock waiting for the shift manager to do their check outs.

4. Prevent labor overages before they happen

Most restaurants simply can’t afford to pay overtime for staff. But sometimes your full-time staff creep toward 40 hours of work without anyone noticing…and suddenly you’re paying 1.5x what you expected for a single worker.

This, too, goes back to proper scheduling policies. Give yourself a bit of wiggle room for the employee who clocks in 10 minutes early or often takes a long time on sidework by never scheduling anyone for more than 38 hours each week.

5. Pay close attention to clock-outs

People make mistakes, and tired servers often leave their long double shift without clocking out for the night. Usually, they’ll realize their mistake and call the store to have someone clock them out (still adding extra time to their shift).

But sometimes, the clock keeps running all night, and no one notices until it’s time to process payroll. Two weeks later, your admin team is spending way too much time correcting clock-outs so that you don’t end up paying for 8 extra hours of work.

Try using technology that puts guardrails in place to prevent any clock-out mistakes before they happen. Kickfin doesn’t allow you to process and pay out tips until an employee is clocked out, so managers can make sure everyone is clocked out at the proper time.

(We also have some other exciting new features that can make your life easier!)

Not only can Kickfin help you reduce labor costs, but we’re ready to simplify your entire tip management process. Reach out to us to learn more about our instant tip calculations, integrations, and smarter tipping solutions.

Restaurant Management

How to Get Your Restaurant Ready for Football Season

Football is back! Whether you’re rooting for your alma mater or just hoping to see massive sales at your restaurant, it’s an exciting — but often stressful — time of year.

If your restaurant has at least one TV, you’re going to have some customers asking you to switch it to ESPN. And if you’re running a sports bar … it’s officially crunch time. Expect your tables to be full (and harder to turn) and your staff to be running on pure adrenaline as the restaurant fills up with fans hoping for a bite to eat.

You probably know the drill: hire more staff, add more servers to game day schedules, and manage your inventory with hungry fans in mind. But if you want to get the most out of football season, get game-ready for some of the busiest weekends of the year with our tips for a successful season.

Consider a game day menu

When your restaurant is at full capacity with hungry football fans, you might want to consider a limited menu for the weekends in order to keep wait times down. Shorten the food menu down to shareable apps, best sellers, and items with the simplest prep so that your kitchen isn’t lined with tickets at halftime.

At the bar, don’t limit your customers to certain cocktails — but consider the power of suggestion and list out some easy-to-batch cocktails that will keep your service bar out of the weeds.

**Make sure they can watch their game**

Is there anything worse than a group of die-hard fans walking in to see their team play — only to realize you don’t have the right subscription service to stream it? Next thing you know, some guy has commandeered the remote to sign into his YouTubeTV account.

Before that embarrassing situation arises, check your cable listings and subscription services to see if you’re missing any important channels. You’re probably going to need to upgrade in order to show games that aren’t carried in your market. Here are just a few channels you might need:

ESPN+
Hulu + Live TV
Peacock
NFL Sunday Ticket
YouTubeTV or cable
Netflix (yep — Netflix will be streaming a few NFL games this year)

If viewing options are limited, or you don’t have enough screens to air multiple games at once, make sure you’ve got a strong wifi connection (free, of course) so that your guests can watch on their phones — or more importantly, talk smack to their fantasy league.

Offer game day deals

Now that you’re logistically ready for the season, it’s time to draw in the customers. Make your restaurant the place for fans to gather by offering drink specials and deals on appetizers.

Leverage social media to get the word out about your game day deals. Consider paying to boost a post or running a giveaway for people who share a post about your game day specials.

Plan for Post-Game

You don’t want the restaurant to empty out as the clock runs down. Entice fans to stay and celebrate (or lick their wounds) once the game ends by extending deals. That could mean a discount for fans of the winning team or an extra-long happy hour.

Pay out your employees — quickly.

After a long game-day shift, your servers and managers are going to be more tired than usual. Let them head home early by using Kickfin to pay out tips instantly. We take care of all of the tip calculations and send tips directly to servers’ bank accounts in seconds, so your exhausted team members don’t have to wait to put their feet up and rest.

Want to see our instant digital tip outs in action? Get a demo of Kickfin today.