The Lifecycle of A Franchise System

• Like all businesses, franchised business systems have lifecycles.
• A company’s lifecycle can be divided into 4 stages of development: i.e.
  • embryonic (fewer than 100 franchises),
  • entrepreneurial (100-500 franchises),
  • “go-go” (between 500 and 1,000 franchises), and
  • mature (1,000+ franchises).
• The stage of a company’s development notably influences the attributes of a franchise system’s offerings to its franchisees.
• For example, a company in its embryonic stage (fewer than 100 franchises) offers an unproven, creative business idea that has tremendous“hope for the future”, but not a lot of documented success. The franchisor is usually inexperienced and the company is typically underfunded through its own operations. In general, these companies offer “high risk, potentially high reward” business opportunities, often referred to as “ground floor” opportunities. Risk-adverse investors should avoid these companies.
• Contrastingly, mature franchise companies offer just the opposite situation, i.e. their franchises are very well documented, the company has a “ton” of experience, is VERY well funded, and all questions have answers. Unfortunately offerings made by these companies are in less-than-optimal locations, the opportunity to build equity is slim, franchisee recognition is hard to earn, and in general, these opportunities are referred to as “buying oneself a job”.
• In between embryonic and mature companies are the entrepreneurial and “go-go” companies. Typically franchise offerings made by companies in either of these two stages are rewarding, solid equity builders, have plenty of good locations left, and company executives actually remember your name.

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