The rate at which a franchise network grows depends on a number of factors; in this short article, I will consider the major ones, and provide examples by way of illustration – but I think its important to say that the rate of expansion of a franchise network isn’t always a good indicator of how suitable it might be for you, or indeed any prospective franchisee.
Probably the most significant factor is the market sector; where there is ongoing demand for a particular product or service, its a lot easier for a franchisor to recruit new franchisees – who often can hit the ground running. In the current climate, one of the most dynamic sectors is the provision of non-medical care to the elderly, in their homes.
The rate of growth of both the number of brands providing this service, and their ability to recruit franchisees, is related directly to the growth of the market – currently there are 10M people aged 65+, and this number will grow to 12.5M by 2025. This sector is one that is worthy of consideration, if you have the attributes required to become a successful franchisee.
However, being in a ‘buoyant’ sector doesn’t always result in success. Several years ago, when eBay was becoming established, a franchise entered the UK from the USA, and grew incredibly quickly – online auctions were very much flavour of the month, and this franchisor put a huge amount of cash behind their promotions. But they failed. And the reason they failed was because the basic business model was unproven – both in the USA, and also in the UK. Many people lost a lot of money as a result.
Another facilitator of rapid growth, is the investment made in marketing and promoting the concept – often coupled with how tight the franchisor’s selection criteria are; unfortunately, there are franchisors who are keener to grow their network numbers, than they are to only recruit ‘suitable’ franchisees. Their rationale is that you can’t predict franchisee success with 100% accuracy (which is true), and if someone wants to invest, why not let them; of course, this does mean that there are a lot of casualties along the way, but the franchisor will take the view that as long as he’s recruiting more than he’s losing through failure, his business is growing, and therefore he’s happy (of course those who have failed wouldn’t share this view!).
My recommendation is to look for brands which are proven, which are growing steadily (but not necessarily spectacularly), where the franchisor checks out your credentials very thoroughly, and where you sense their values match your own.