Using Real Estate To Achieve Economies of Scale as You Grow
By: Jason Fefer
In recent research from the International Journal of Hospitality Management, Kyung A. Sun highlights that one of the key drivers of franchising a business is to achieve economies of scale. This not only boosts product output, it also increases efficiency and amplifies bargaining clout. With this powerful idea in mind, let’s dive deeper into how franchisees can use real estate to realize a similar advantage in their own business.
Every franchisee’s dream is to expand their empire, transforming a single unit into a network of thriving outlets. This journey of expansion inevitably intersects with the idea of economies of scale. At its most basic, “economies of scale” is a straightforward concept: It’s the principle that as you produce or purchase more of something, the cost for each individual unit goes down. One soda might cost $1, but buy them in a pack of 20 and each might cost just 75 cents. It’s an elementary principle that has profound implications in the complex realm of franchising and real estate.
Real estate, often the most significant investment for a franchisee, directly affects profitability and growth. But how does it intertwine synergistically with economies of scale?
