A relatively new franchise I’m considering investing in is expanding its franchisee network rapidly,

Author: Brain Duckett

answered by Brain Duckett

Chairman of The Franchising Centre

Rapid early expansion of a franchised network is always a concern, unless the franchisor’s business plan demonstrates such expansion can be properly resourced both in terms of finance and personnel. Such a plan, properly prepared with the help of a British Franchise Association affiliated consultant, will rarely demonstrate that more than, say, five franchisees in the first year and maybe 10 in the second year can be successfully recruited, trained and support In my experience, more rapid expansion than that, even if almost limitless funds are available, will lead to poor recruitment choices, overloaded training facilities and inadequate support for the early franchisees. Remember, the franchisor is itself learning how to operate a new business - a franchising business - and that there are many lessons to be learned and mistakes to be made along the way, even if expert advice is on hand. Expanding too quickly means whatever staff are available are spinning too many plates and some of those plates will inevitably crash to the floor. Nobody, including the banks, will be very impressed when the early franchisees start to fail. The most common reason for rapid expansion is the franchisor’s motivation to get in as many upfront franchise fees as quickly as possible with little regard for the long-term success of either the network or individual franchisees. Good franchising is not a route to overnight success for either franchisors or franchisees and get-rich-quick franchisors are best avoided.

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