Hi Kimberley,
1- Should we create multiple location pages for the same franchise owner?
You're right, the answer is "yes" but the objective of creating a single page per location is not so your franchisee shows up in local search results (on Google Maps), but so they show up in organic search results.
Can they just use a friend's/relative's address?
You need a unique mailing address for each location you want to show up in maps. A place where someone will answer the phone during business hours with a typical business greeting like "XYZ Business. How can I help you." I don't recommend using friends/relatives addresses for lots of reasons including the fact that friends and relatives move and you'd still have to incur the cost of getting a unique phone number and optimizing a business listing for each location.
2. It seems like a lot less work just building one landing page for each location, but is the payoff the same?
More is better. Google favors fresh, active, and growing websites. Many businesses build a one-page-fits-all solution due to budget constraints. That can work in niche / non-competitive markets, but rarely does otherwise. You should assess your budget, resources, and competition and then decide on an approach.