The Speed of Franchise Growth: How Fast Should a Brand Expand?

How fast is too fast when it comes to growing a franchise? It can be a tricky question to answer with a lot of dependent factors. Still, the most simple response is that businesses should only be selling more franchise agreements if they have the internal capabilities to support those new owners.  

“This thought process of growing too quickly just means growing beyond the resources and selling beyond the brand’s support capacity,” said Joshua Kovacs, CEO and co-founder of Oakscale Franchise Development. “If you've added 100 franchisees in two years, but you only have the development of the support capability to support 20 of them, you're going to have a lot of very unhappy franchisees who are probably not going to hit their business goals, and that can lead to structural issues with the franchisor.”

Companies need to ensure that they have enough personnel and resources to help franchisees in the signing, training and development process, as royalties do not start coming in until their doors are open for business. 

Because of this, home service franchises can often scale quickly, as the business model has a short timespan from signing to opening. The retail sphere takes longer to open up, so franchisors usually prefer multi-unit deals and have higher initial investments. 

“Home service franchisors are remarkably quick and have some of the fastest growing brands out there. A franchisee can sign an agreement and probably get the business open in three months,” said Kovacs. “Versus with a restaurant franchise agreement or gym franchise agreement, it starts to become a bit more complicated because you have a real estate portion: doing an analysis of the market with brokers, vetting out locations that meet brand standards, negotiating the lease and then building it out. You have these dichotomies in franchising of the non-retail brands scaling far more quickly than retail brands because of how long it takes to get the businesses open.”

The maturity of the business can also play a role in the rate at which a company can scale because bigger and more established brands have more capital, more brand recognition and more personnel at a corporate level to support the franchise development efforts. But even smaller brands can successfully grow fast, as long as they have a detailed plan in place, Kovacs said.

He points to the successfully rapid scaling of Pet Well Clinic, the national veterinary franchise of which he owns multiple units. The brand has quickly grown to have over 110 units across the United States. 

“There are plenty of startup franchisors that can become very popular very quickly, who go to market with zero franchise units and become an overnight success,” added Kovacs. “And a lot of times, it's up to having great development partners. If they don't have a good strategy, you can get in trouble because that's really where you get this.”

Ted Fireman, a franchise consultant with FranNet, agrees that businesses can benefit from enlisting the help of a third party to decide on a strategy for growth. 

“Understandably, every franchise wants to grow.  Too often, marketing and sales get ahead of the franchisor's ability to properly train franchise owners and provide continuous support,” said Fireman. “When new units aren't opening on schedule or unit economics aren't where they should be, the franchisor needs to reflect on their growth and sometimes bring in some outside expertise.”