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Does Size Truly Matter?

Written by: Kim Ellis

Article Overview: Evaluating the advantages and disadvantages of large vs. small franchise systems. Sometimes size does matter. When talking about a piece of chocolate cake – bigger is always better. When evaluating new cell phones – smaller gets the nod. In franchising, there are some advantages to being part of a large franchise system and other advantages to joining a small system. The question is not, “Which is better?” but “Which is better for you?”

Does Size Truly Matter?

Sometimes size does matter. When talking about a piece of chocolate cake – bigger is always better. When evaluating new cell phones – smaller gets the nod. In franchising, there are some advantages to being part of a large franchise system and other advantages to joining a small system. The question is not, “Which is better?” but “Which is better for you?”

Advantages of Large Franchise Systems
Everyone is familiar with the really big franchise companies such as McDonalds, Subway. Each has over 25,000 units and they are ubiquitous around the country if not the world. Since franchise companies generally start out with a single unit, growth of this magnitude takes years and years to achieve. Large franchise companies have had the opportunity to test and prove their value over and over again, which is the main attraction of franchising  a proven operating system.

Perhaps the most obvious advantage of a large franchise is name recognition. When you see the Golden Arches your mouth will start watering even before you smell the hamburgers frying. Larger systems will have larger advertising budgets, meaning there will be more, and usually better, national advertising campaigns, increasing name recognition. Even moderately large systems, those with units numbering in the hundreds, have been around long enough to have tweaked their operations to the point they provide a pretty low risk to potential buyers. A smaller or newer franchise system may have to adjust their operations many times before achieving optimal results.

Support is an additional advantage of being a franchisee in a large franchise system. To achieve growth, a company will need to have a dedicated support staff that can help franchisees with any issue or problem. Also, larger companies are more likely to provide new franchisees with such specialized resources as demographic profiling, real estate assistance and technical support.

Advantages of Small Franchise Systems
With all of the advantages of a large franchise system, not everything is a bed of roses. First of all, there’s the whole idea of being a small fish in a large pond. If you like individualized attention, in a small system you may have a direct line to the company’s president or vice president. In a large system, you contact person may be a low-level employee in the giant corporate structure.

Franchisees in a small franchise system can have a greater say in the business as a whole and will sometimes have more flexibility in managing their own businesses. Once a system grows to a substantial size, there will generally be extensive rules for franchisees as well as a staff who ensures the compliance of each and every regulation – from the color of your businesses’ roof to the way you greet customers at the counter. At a smaller franchise system you will usually find fewer rules. If you like to do a bit of experimenting, a smaller franchise company may allow you to do so and will even welcome your ideas and suggestions.

Another advantage of smaller franchise systems is that they are less likely than large franchisors to be sold out in your area. If you want to join a large franchise, you may have to wait until an existing franchisee wants to sell.

And that brings up another point: Subway does not need to look for franchisees. They probably get hundreds of inquiries every week if not every day. Of those inquiries they are only going to be interested in awarding franchises to people with very strong qualifications. A smaller, newer franchise company is going to be more interested in you and may be willing to make accommodations so that you can join the team.

The franchise company and the people running it are more important than the size of the business as far as franchisee satisfaction goes. If you are interested in a business but unsure if you’d be a good fit, there’s one sure way to find out and that’s by talking to a number of franchisees in the system.

You will need to ask if they felt the support and training they received prior to opening their franchise unit was adequate. Find out how they feel about the support they are currently receiving and if they feel they are on track to meet their financial goals.

Both large and small franchise concepts have advantages and disadvantages so the more you understand about the company and your role as a franchisee, the better equipped you will be to make the decision.

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Article Tags: advertising campaigns, chocolate cake, franch, franchise companies, franchise system, franchise systems, franchisee, franchisees, golden arches, hamburgers, larger companies, larger systems, main attraction, mcdonalds, national advertising, nod, optimal results, single unit, specialized resources, support staff



Related Forum Posts
Choose 'stability' in a franchise - Tapping into current 'trendy' franchises can be risky business - You may find yourself stuck with a longer term 10yr contract. What happens when the trend fizzles? Your investment disappears... There are a whole host of factors to consider when entering into the arena of franchising. A few items on the check list that should steer you into safer waters... away from the predators... are listed here. 1. Age (stability): 10+ years 2. Satisfied franchisees: 85% + satisfaction 3. Size (stability again): 250 units 4. Strong profits 5. Great management There are other measurements that need to be considered like - identifying accurate store profits. There are short-lists of franchises that meet these criteria. That's for another thread...
Re: Choose 'stability' in a franchise - [quote="RussellWebb":2gm9ygof]Tapping into current 'trendy' franchises can be risky business - You may find yourself stuck with a longer term 10yr contract. What happens when the trend fizzles? Your investment disappears... There are a whole host of factors to consider when entering into the arena of franchising. A few items on the check list that should steer you into safer waters... away from the predators... are listed here. 1. Age (stability): 10+ years 2. Satisfied franchisees: 85% + satisfaction 3. Size (stability again): 250 units 4. Strong profits 5. Great management There are other measurements that need to be considered like - identifying accurate store profits. There are short-lists of franchises that meet these criteria. That's for another thread...[/quote:2gm9ygof] Hi Russell, Looking forward to seeing this short-list!
Think like an Association - Hey Sebastian, Maybe you could try thinking like an Association... I would study the structure or formats used by other Associations. What are they doing to add value for their members? The BBB plays a monitoring role for consumers by gathering data about business' that are behaving badly. And they're pretty successful at it too. Maybe you can offer a 'Platinum Program' that franchisors buy into. Accredited members only. Criteria could be strict: 1. Age (stability): 10+ years 2. Satisfied franchisees: 85% + satisfaction 3. Size (stability again): 250 units 4. Strong profits 5. Great management -Maybe a 'Gold Program' for those Franchisors that aren't quite at that level, but can strive to reach it... -Top 100, 500, 1000 Listing for qualified members... maybe a slap at Entrepreneur.com and their biased top 10 lists... -Maybe act as a monitor like BBB? -Maybe team up with FranSurvey OR do something similar for each member (not sure about Fransurvey's rep, but I like the concept) There's so much discontent within the franchising arena that I think if you were part of the solution, then you could create a win/win with your Association. The only downside is that this power can get abused if there aren't good checks and balances within the association.


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