When you’re researching franchise opportunities, sometimes the warning signs are obvious: shrinking systems, high turnover rates, unhappy franchisees. But it’s not always so cut and dried. Sometimes what looks like a green light at first glance might actually be a red light — or at least a yellow â€œslow down and ask more questionsâ€ light.
Take growth, for instance. Growth is important to franchising; there’s no doubt about that. That’s why year-to-year growth is one of the biggest factors considered in Entrepreneur’s annual Franchise 500 ranking. If companies didn’t want to grow, they wouldn’t franchise in the first place. But is growth — especially rapid growth — always a good thing?
It’s easy to assume that fast growth means a franchise system is strong and will only get stronger. And this can certainly be the case. But many new franchises grow quickly, only to then have their numbers plummet a few years down the line. So when looking at a fast-growing franchise, it’s important to stop and examine why the company is growing so quickly and how prepared they are for that growth.
Here are a few questions you should ask:
1. How careful is the franchisor in choosing its franchisees?