When looking for a franchise it is important to know how the franchises growth looks. Growth is a very broad term to use in franchising. So how do you know if there is growth? How do you determine what is growth? Growth can be measured in many ways. Here are some areas that show there is growth.
The number of franchisees is important. This number shows how many new franchisees are added each year. If there are too few, that may be an indicator that there is a problem with the system. If there are too many, it could mean that the support of the staff is overburdened and support services might suffer. The best way to measure this growth rate is by getting a percentage of new franchisees to total franchisees. A strong percentage would be about 10 to 35 percent of total franchisees. Another way to measure this is by seeing if there is one full-time support person for each 15-20 (or fewer) new franchisees. This shows whether or not the staff will be overwhelmed or not and if you’ll be able to get the help you need.
The number of units is another way of determining how the growth of a franchise is going. This number is easy to determine because it is in the UFOC. This information gives you information on the vibrancy of the system and the workload of the support people. First you need to find out the number of new unit openings in the system. Then you need to find out how many are franchisee first units or multiple units. This is important because multiple units show that something is right in the system. Another thing that’s good about multiple units is that they don’t need as much support because they franchisees are experienced. If you find out that not many units are opening or even that the amount of units is decreasing, that is a red flag. Find out why it’s happening and if you see a pattern move on and look for another franchise.
Another way to measure growth is through the franchisor revenue and income. This is the easiest way to measure the growth rate but is also the least meaningful. You want to look for numbers that show that the franchisor is strong enough to have long-term viability. It doesn’t make a difference in how much their revenue or profit is growing.
Growth is a great way to know if the franchise you’re looking at is a wise choice to invest in. It is important to know if the franchisor will be able to support you as much as you need.