The Speed of Franchise Growth: How Fast Should You Expand?

In the world of franchising, growth is the name of the game. Every franchise brand is an explicitly growth-oriented enterprise. But there’s no industry-wide agreement when it comes to the optimal speed of growth. Some brands deliberately maintain a single-digit unit count for years, perfecting their model and propping up their early franchisees before breaking into new markets. Others aim to saturate their market right out of the gate, relying on increasing brand recognition and multiplying royalty fees to establish and protect their niche. 

Pet-care franchise Hounds Town USA has taken the former approach, establishing just 11 franchise units since its founding in 2001. 

“I believe that it is imperative for franchises to grow slowly,” said Jackie Bondanza, President of Hounds Town, Inc. “It can take years for a system to truly understand and optimize its own inner workings, to get the model right so that it can be adopted seamlessly and successfully by franchisees.”

That strategy has paid off for Hounds Town USA, which has enjoyed an average year-over-year sales increase of over 32%. But now Bondanza says the franchise is ready to ramp up its growth.

“2021 is ‘go time’ for us,” she said. “After this year, in which we expect to bring on about 12–15 new franchisees, we’re going to start expanding much more quickly, bringing on an additional 20–30 units every year.”

Self-serve restaurant concept The Salad Station has established nearly twice as many units as Hounds Town USA in roughly half the time, but Franchise Development Director John Mike Heroman is similarly focused on the long game. 

“You don’t want to outpace what you are able to support,” Heroman said. “In the first two or three years, you have to be growing because your revenue stream depends on having franchisees, but you need to be focused on building the foundation for something larger.”

Heroman holds 20 units as the elbow of the growth curve for most franchise brands, which is exactly where his franchise stands today. 

“Once you get past 20, you’ve proven the foundation is there,” he said. “We are in a position now to grow at whatever pace we like. That wasn’t the case two or three years ago when we weren’t as firmly established. Today, if we can find a location that meets our area requirements and a good franchisee to run the business — there is nothing holding us back.”

According to Michael Wagner, President of pool-service franchise Pool Scouts*, franchises need to be more focused on the health of initial franchise locations than on growth, which he says will follow if early adopters are well taken care of.

“Being an early franchisee has some benefits and challenges,” he said. “Usually the cost to get in is significantly lower, but there’s more risk, and there’s always some growing pains. If the model is tight and you help those early franchisees find success, then fast growth becomes a much more viable option.”

Like Hounds Town USA and The Salad Station, Pool Scouts is preparing to increase its rate of expansion in the coming years, but Wagner said there is a limit, eventually.

“We don’t plan to slow our growth any time soon,” Wagner said, “but we see about 500 viable, solid territories around the country. We’ve sold 42 so far, with 31 open, so we have a lot of room to grow.”

Heroman sees no such ceiling for The Salad Station. 

“We see a tremendous demand for what we’re offering in the marketplace, and we don’t expect that to change,” he said. “As long as it doesn’t, the sky’s the limit.”

Each of the brands we spoke to underscored the advantages of their models for growth — Pool Scouts prides itself on the enviably industry-savvy leadership team of their backer, Buzz Franchise Brands; The Salad Station has a unique operational model that requires less labor than competitors in its segment; and Hounds Town USA boasts one of the lowest costs of entry of any pet-care franchise — but each emphasized the fundamental importance of selecting the right early franchises for their brand.

“It’s crucial that we are extremely particular about who we bring into our system,” Bondanza said. “We view our franchisees as an extended family. We understand that not every franchisee candidate feels the same way, but that’s what works for our system.”

That alignment between franchisee and franchisor is essential for successful growth at any speed, Heroman said, and to ensure that alignment, a franchisor should first study their own brand.

“You have to be honest to the core about what your brand is, which markets it can work in, and who your franchisees are,” he said. “You have to be brutally honest with yourself about what your model is, what your brand is and what kind of growth you can expect, and then you plan accordingly.”