Where are you in the franchising cycle?

Understanding the key stages of your franchise journey can prepare you to weather any challenges along the way

Like many businesses, a franchisee will typically experience four distinct phases during its lifetime: start-up, growth, maturity and renewal or decline. Novuna, one of the UK’s most trusted finance providers, has outlined each stage in the franchising cycle and how to successfully navigate it.

The start-up stage

Buying into a franchise alleviates a lot of the risk associated with starting a new business. But the start-up phase can still be laden with potential pitfalls.

Business owners will need to straddle myriad disciplines, from administration and accounting to marketing and human resources. Having lots of capital is also essential as it typically takes up to three years for start-up businesses to turn a profit. So, it is pivotal to ensure cash flow is kept positive and insolvency is prevented. A huge benefit during the start-up stage is the access to guidance from the franchisor and other franchisees in the network. Be sure to take advantage of their support.

The growth stage

Typically, a franchise will hit the growth stage around the two-year mark, but it can vary. You’ll have a steady flow of customers, consistent revenue and sustainable personal income. You’ll start to find things relatively comfortable and may start to break even and see a return on your initial investment.

This will often be a time when you take a step back from the day-to-day running of your business and delegate management responsibilities to your staff to focus on the bigger picture and growth opportunities.

The maturity stage

After several years of running your franchise, you’ll reach the maturity stage. Cash flow is healthy and revenue is high enough to ensure that all costs are covered and you are making a good profit.

You may even begin to expand into new units and territories.

Do not fall asleep at the wheel and allow your business to lose touch with its audience base. To ensure continued growth and success, ask yourself:

• What is your competition up to?
• How can you expand?
• Is it time to sell?

The renewal or decline stage

How longstanding franchises handle the last stage will define whether they fade away or become an enduring market presence.

There are a number of reasons why a business might experience decline, including:

• Increased competition
• Industry changes
• Outdated technology
• Lack of diversification and expansion
• Fall in customer demand

You will need to ask yourself: ‘Is it time to sell or reinvest?’.

If you decide to continue, having the backing of a franchisor who is up-to-date with market trends will help you see continued success.