For Franchises, Growing Rapidly Isn’t Always Best
As many businesses discover too late, rapid expansion doesn’t always mean success when building a franchise. When growing quickly trumps other goals, such as grooming competent leaders, controlling costs, picking prime locations or building a customer base, the company’s operations can turn sloppy.“It’s definitely possible to kill off a good concept by trying to grow too fast,” says Scott Shane, an economics professor at Case Western Reserve University.
Several franchising experts point to Boston Market as a prime example. The company, formerly Boston Chicken, grew from 20 stores in the late 1980s to more than 900 franchises by 1998. But while costs at the chain were mushrooming as it tried to build more stand-alone restaurants, the individual stores couldn’t sell enough food to pay the bills and repay company loans. The chain ultimately filed for Chapter 11 bankruptcy reorganization, bought back nearly all of the franchises and closed almost 200 stores in 1998, before getting eaten up by McDonald’s Corp. in 2000. The problem, experts say, was the company became so obsessed with growth that it overlooked principles of good business like grooming good managers and building relations in the community.
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