Now comes the real question:
How are you going to fund it — without sinking the whole ship?
Multi-unit growth sounds exciting, and it can be. But expanding before you’re financially ready is one of the fastest ways to burn out (or blow up) a franchise. We’ve seen it too many times — the growth plan was there, but the capital strategy wasn’t.
Let’s talk about the two main ways franchisees fund expansion — debt and equity — and how to avoid the mistakes that kill momentum before unit #2 even opens.
1. Debt: you keep control, but you carry the weight
When you borrow money (bank loan, line of credit, CSBFL, BDC, etc.), you’re betting on yourself.
You keep 100% ownership. You don’t answer to a partner. You’re in charge of every decision — but you’re also on the hook for every payment.
If your margins are consistent and your first location is stable, debt can absolutely work.
But if you’re already tight on cash, and a new location needs 6–9 months to break even? That monthly repayment hits harder than most people expect.
Lenders look at your debt service coverage ratio (DSCR) — basically, how easily you can cover debt with your cash flow. If you’re barely above 1.25x, and your forecast relies on best-case sales, tread carefully.
Use debt when:
- You want full control
- You have consistent cash flow
- You’re expanding gradually and with a buffer
2. Equity: shared risk, shared return
Equity means bringing in a partner — someone who gives you money in exchange for ownership.
No monthly payments. No interest. But now, someone else has a seat at the table.
Done right, equity can be a smart way to scale. Done wrong, it can turn into a mess of approvals, power struggles, and unexpected exits.
Some equity partners are silent. Others want a say in operations. Some just want a return. Others want a long-term seat at the table. The key is alignment.
If you go this route, get your agreements tight. Spell out:
- Who gets paid and when
- What happens if someone wants out
- Who makes which decisions
A lot of good franchise growth stories have been derailed by vague handshake deals. Don’t be that story.
3. The hybrid model: most grown-ups use both
The truth? Most multi-unit operators use a mix.
Maybe you take on a partner for one location and use BDC financing for another. Maybe your franchisor has internal leasing or lending programs you can stack with your existing credit lines.
It’s not about finding the cheapest money. It’s about finding a mix that keeps you flexible.
The more units you open, the more you need to think like a portfolio manager — not just an operator.
4. Common mistakes we see all the time
Let’s be blunt. These are the traps:
Expanding too early
If your first unit isn’t stable — not just profitable, but predictably profitable — you’re not ready. If margins are swinging month to month, that’s a red flag.
Forgetting working capital
Buildout and signage are obvious. What’s not? 3–6 months of payroll, rent, marketing, and supply costs before you hit breakeven.
Assuming your best unit can carry the worst one
Lenders look at each location separately. Don’t expect your flagship to float the laggards.
Overestimating “synergies”
Yes, you’ll gain some efficiencies across locations — but you’ll also add headaches. Staffing, logistics, supervision, inventory — everything gets harder at scale.
Having messy or outdated books
If your books are a year behind, your accountant is MIA, or your POS doesn’t match your bank deposits — good luck getting funding. Lenders don’t just look at your business idea — they look at how you manage money.
Clean financials aren’t just for tax season. They’re your growth passport.
5. Long-term thinking wins
The goal isn’t to grow at any cost. It’s to grow without blowing up your margins or giving up more control than you’re comfortable with.
Ask yourself:
- Can I survive a slow ramp-up at the new location?
- Do I have the systems in place to manage multiple sites?
- Am I building a business I still want to run 5 years from now?
If you’re not sure how to structure the financing — or how much risk is too much — get advice before you move.
Because at this level, you’re not just running a store.
You’re running a business portfolio. And the stakes are higher than ever.
