Size of System

The Franchising Superstars:

The highly visible larger franchise systems are well capitalized, and have a demonstrated track record and experienced management staff. Usually, they are lower-risk investments.

Since they have more franchisees, the new franchisee gets more co-operative benefits such as advertising reach, better brand recognition, preferential treatment from suppliers and lower operating costs through volume purchasing. One of the biggest reasons for choosing a known name franchise is instant customers. On the other hand, larger and more mature franchises tend to be in flat markets with many competitors. New franchisees may also have few good locations available to them. Since the franchise is a lower risk investment, the entry fees are likely to be large.

The Rising Stars:

Up and coming franchisors tend to be in an uncrowded industry that is not overrun with competition. The system management is usually flexible and encourages participation from the franchisees. Additionally, the franchisor may be willing to negotiate the terms of the transaction.

Newer franchisors however, may not have worked out all the bugs in the system, and franchisees will need to experiment along with them. The small number of franchisees also brings less advertising power, with a corresponding lack of name recognition. Franchisees may also have to bear the brunt of higher wholesale prices from suppliers.

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