When looking at a franchise opportunity, there are many factors to consider when assessing what is going to be a good fit for your specific situation. One of those factors is the stage of growth that the franchise is currently in. The stage of growth refers to how many units the franchise system has. There are five different stages of growth: Emerging/Entrepreneur, Partner, Plug & Play, Empire and Hybrid. Let’s look at each one in detail.
Emerging/Entrepreneur Stage
This includes franchise brands that have less than 20 units. Typically these are newer franchises who are in their first couple years of franchising and still getting their feet wet. They may have a corporate location that has been around for a long time, but just recently got into franchising their business. Or they could have decided to open a corporate location around the same time that they franchised their business. With an emerging brand, the territory is typically wide open. Since they have less than 20 units, that means there is a lot of availability. It also could mean that the territories they are awarding are very large. You may get more zip codes included with an emerging brand than you would an empire or plug and play brand.
Emerging brands typically will want a lot of feedback from their franchisees. They will be asking for their franchisees to give them ideas, test out new products/services, and potentially be more involved in the growth of the franchise brand. The franchise may not have figured out what works best for their business model and there could be a greater amount of change in how the business is run the first few years.
These brands could be the most risky in the sense that they aren’t as proven. Since they aren’t as proven, some of them could be on the lower investment level. You also have the opportunity to be in on the ground floor of a newer franchise. Oftentimes emerging franchises will not have an Item 19. An Item 19 is one section of the Franchise Disclosure Document. This section talks about the financial performance of the franchisees in their system. The franchise is allowed to disclose as much or as little as they’d like. Some brands don’t disclose any information at all, and this is typically the case with emerging brands. If you’re needing financial stability and want proven systems, this stage is likely not going to be a good fit for you. On the flip side, if you have more wiggle room on when you make money, want to be collaborating with the franchise and have fewer rules, this could be an awesome fit for you. There are several very, very successful large franchises and at one point they were an emerging brand. Your ability to assess whether an emerging brand could be successful will be very important. About ten percent of the franchises we present to our candidates fall into this category.
Partner
The second stage of growth is the partner level. This includes franchises with 20-100 units. At this level, the franchise has likely been around for a few years and really starting to get into a good groove. It also could still be a newer franchise model that has hired an outside firm to grow rapidly. The partner size still will likely have a lot of desirable territories available and the market won’t be saturated yet with this brand.
Your level of involvement with corporate could still be on the more collaborative side. They should have their systems and processes in place at this point, but it could be that they are still testing new ideas. You could potentially be in a newer market for the franchise since they likely haven’t grown to all 50 states yet.
We have several favorite partner level franchises that have amazing Item 19s. Just because it’s still on the newer side doesn’t mean that they aren’t proven or successful. The partner level will have more brand awareness as the public starts to see and hear the name of the franchise. About a third of the franchises that we present to our candidates fall into this category.
Plug & Play
The name says it all. For this stage of growth you are expected to plug in the systems and processes and replicate what other franchisee owners have done. The level includes franchises that have between 100-500 units. These franchises are very proven and are our favorite brands.
At this level, it’s getting increasingly harder to find great territories. They will be fewer and farther between, but if there’s one available, you should snatch it up before it’s taken. The plug and play franchises have very reliable and dependable processes in place. You won’t be collaborating or creating new ideas, as doing such would be going against the proven model that has already been successful.
There could be resale opportunities available as some of the old franchisee owners could be coming to the end of their franchise agreement term. Each franchise determines how long the term will be, but it’s most commonly a 10 year term. At 10 years, some franchisee owners will renew for another 10 years while others will decide to sell their business and move to the next idea or retire. These resale opportunities could be some amazing businesses to buy as the business has already been established and most likely working well.
At the plug and play level you’ll also see faster ramp-up times. This means you’ll be able to open your doors quickly after signing your franchise agreement and start becoming profitable more quickly. A lot of the plug and play models are going to be service based businesses and not have a physical location. Over half of the franchise brands we show our candidates fall into this category.
Empire
This is the stage of growth that most of the well-known franchise brands will fall into. These include franchises that have over 500 units. When a typical person thinks of franchises they think of McDonalds, Subway, Scooters, gyms, restaurants, etc. These brands are very established and some have thousands of units. A lot of times they can be very bureaucratic and controlling. But this is needed in order to ensure that the product or service is the same. The procedures are set in place for franchisees to be successful, and deviating from that could be detrimental to their success.
These brands have huge brand recognition and awareness. They don’t typically need to advertise as much. They can have very strong financials and also can be very expensive. Oftentimes it’s very hard to get into an empire brand. If there is available territory or corporate wants to open a new location they are going to go to their existing franchisees first instead of taking the risk and starting with a new owner. A lot of their franchisees own multiple units and they would purchase the next new location.
For the most part, the empire brands are brick and mortar type businesses and are heavily product based. There are opportunities for mergers and acquisitions at this level as well. Less than ten percent of the franchises that we present to our candidates fall into this category.
Hybrid
The hybrid level encompasses the first three levels of growth. They are a parent company that owns franchises in the emerging, partner, and plug and play stages of growth. The hybrid systems are great because there is a lot of synergy between the different brands that it owns. Typically you’ll see a hybrid system focus on a particular industry of brands, such as home improvement, senior care, or outdoor living.
Hybrid systems are able to leverage information, processes and procedures from one franchise brand and implement those same learnings to another brand in their system. This allows the brands to have synergy. Since they are usually in similar industries, the brands under the same umbrella can then cross sell and refer customers to the other brands in their system. Many of them also share the same CRMs or systems making it easier and more effective for their franchisees to purchase an additional franchise in the same system. Many of the brands we show in the first three stages of growth will fall into the hybrid stage of growth as well.
Next Steps
Are you curious to find out which stage of growth will make the most sense for you? Take our 15 minute business assessment here: https://zorakle.net/assessment/welcome/thoughtfulfranchisebrokers. This is an assessment we use with all of our candidates and was created by a behavioral scientist just for the franchise industry. It looks at your values, work style, competencies and more and helps to match you to good franchises. It has helped to match over 40,000 candidates to franchises. Once you’ve taken the assessment, send us a message and we can go over your results and talk about what franchises would be the best fit for you.
