Rapid expansion doesn't always mean success when it comes to franchise businesses.
If growing the franchise quickly, trumps other goals, such as developing successful franchisees, tweaking operations, picking prime locations or building a solid customer base, company operations can turn bad in a hurry.Growing franchise businesses too fast is an easy to kill off a good concept. Boston Market is a good example. The company, formerly Boston Chicken, grew from 20 stores in the late 1980s to more than 900 franchises by 1998. The franchisor decided that building stand alone stores was the way it wanted to grow, the stand alone stores couldn't sell enough food to pay the bills and repay their loans. The chain filed for Chapter 11 bankruptcy, bought back nearly all of the franchises and closed almost 200 stores in 1998, before getting eaten up by McDonald's in 2000. It is a wholly owned subsidary of McDonalds Corporation.
Some say the root of the problem was the company became so obsessed with growth that it overlooked principles of good business like grooming good franchisees and managers while building solid relations in the community.If a franchisee is not making money at a single outlet, chances are pretty good that they are not going to make a lot of money at multiple locations.It's not uncommon for franchise businesses to get overly ambitious in their franchising plans, especially since many franchisors are attracted to franchising because they want to grow faster than their own capital allows. Franchising allows businesses to use OPM (other peoples money) and therefore limit their risk but not necessarily the risk of the franchisees.
Jim Coen, Franchise Perfection, jim@franchiseperfection.com- Franchise topic:
