All Franchise Systems Go Through 5 Predictable Stages Of Growth

Growing Pains: Seizing the Opportunity

All franchise systems go through five predictable stages of growth. Growing from one stage to another creates equally predictable changes, crises and challenges. For those that are alert to the signs of a franchise system’s stage of growth there is great opportunity. Opportunity that is – if you fit within that franchise system’s current stage of growth.  If not, you can expect lots of frustration and disappointment.

Let me give you an example

I was recently asked by Andy a franchise broker to assist with his client Tom. Prior to seeking Andy’s counsel Tom had worked in a successful family business and purchased three different franchises. The first was a cool new vending business - which he ran for 1.5 years then got bored. The second was an area developer opportunity bringing a new ice cream concept to the West Coast. After 1.5 years the franchisor bought the territory back as Tom had not opened a single store. The third was an area developer opportunity with a unique new sushi concept – but after 1.5 years he simply stepped out of the business. While others found satisfaction and success within these three franchise systems, Tom was miserable and frustrated. Three great franchise systems - none however right for Tom. Why?

The lure of unique, innovative and first to market

Tom had selected three unique early stage franchise concepts (Stage 1 or 2) whereas he would be a better fit for Stage 5 franchise systems. Both Stage 1 and Stage 5 companies are innovative, often first to market, offering excellent territories and flexibility – all things that Tom found attractive. Stage 5 companies however, have stronger brand recognition, systems and support than Stage 1 companies. These were things that Tom needed based on his low (Zoracle) scores in marketing, sales and operations. Tom was good at executing and exploiting systems not at creating them. Tom was a collaborator and subject matter expert not a hunter or pioneer. He recognized the importance of innovation and being first to market but lacked the skills and emotional make-up to handle the isolation and long ramp-up time. Bottom-line he had not calculated whether or not he was a good stage of growth fit.

How do you determine Stage of Growth?

Stages of Growth are determined by a company's managerial style, organizational structure, formal systems, major strategic goals and founder/owner involvement. As a franchise organization grows, the systems and procedures will adapt to support an evolving business model, the needs of the franchisees and to satisfy end-user demands. I’ll address how franchisors evolve through each of the five stages of growth in a future article and how you might seize the opportunities within each. Or if you’re like me - passionate about learning yet possessing little patience you can watch this Start-up to Supersized: Navigating Franchise Growth.

In the meantime, as you ponder the idea of becoming a franchisee remember a franchisee that is in-step with a franchise organization's stage of growth will prove more compatible and likely perform better. Opportunity like snowflakes varies from person to person. To seize an opportunity you must understand yourself and the growing pains of each franchise system you are researching.

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