--- title: "In Franchising, Does Size Matter?" url: https://burnaze.com/article/6bce8f4c-6114-414d-8b30-d678078c6230 source: "1851 Franchise" original_url: https://1851franchise.com/in-franchising-does-size-matter-2713671 category: "Franchise Industry" industry: "Franchise Industry" published: 2020-08-10T13:08:54.000Z modified: 2026-11-01T22:34:10.035Z image: https://newimage.1851franchise.com/cdn-cgi/image/quality=85,format=webp,width=1280,height=720/story/featureImage/721e392b387b69f5c290ba610758d79b2738.jpg --- # In Franchising, Does Size Matter? **TL;DR:** The article discusses the importance of size in franchising, exploring the advantages and disadvantages of being a large or small franchise brand. A 120-unit brand can be considered successful with $6,000,000 in royalty, and franchisors should focus on numbers like applications and profitability. *originally published in 1851 Franchise on 2020-08-10. [Read the original](https://1851franchise.com/in-franchising-does-size-matter-2713671).* ## Key facts - A 120-unit brand can be considered successful with $6,000,000 in royalty - Franchisors should focus on numbers like applications and profitability - An 8-year growth plan to 120 units is a reasonable goal ## Story **Dunkin’, Taco Bell, McDonald’s, Sonic, The UPS Store, Ace Hardware, Planet Fitness — those are the outliers when it comes to brand size. For the vast majority of franchisors, those are the dream brands.** **What is the right size for a franchise brand? Are there advantages to staying small?** **It depends.** ## Defining success **What does success look like for the franchisor? Is it that moment when the system produces enough volume that the kicked-off royalties carry the business past breakeven? Is it when the private equity firms start hounding the franchisor for potential purchase? Is it when franchisee satisfaction reaches perfection and franchisees want to swallow up more units?** **It begins with vision. What is your vision over the next 12 months? Start there. Small bites will drive great growth. Franchisors who basically follow the operational process of the dream brands (slow and steady wins the race) are likely the brands that grow – and grow around the two most important features of a successful brand, unit level profitability and franchisee satisfaction.** **Are there advantages of continued growth?** **Imagine the following scenario: a franchise brand remains under 50 units, but has an amazing group of successful franchisees.** **Imagine the brand has only 25 locations, each owned by one franchisee. Each of the first five years, the brand has awarded five more franchisees into this system and at year six, the first franchisees can add another location. Corporately, the vision has been to offer amazing support to those franchisees to help them each join a $1 million club. And, for cash flow, the franchisor owns one corporate location.** - **25 Locations X $1,000,000 = $25,000,000** - **$25,000,000 X .05 (average royalty) = $1,250,000** - **5 new franchisees X $30,000 franchise fee = $150,000** - **$1,000,000 location at .15 profitability = $150,000** - **Total income for franchisor $1,550,000** - **CEO, COO, CMO, 5 support team/admin: - $750,000 in salary** - **.20 Operating Expenses: - $310,000** - **Rough annual income: $490,000** - **Average franchise marketing cost per deal $25,000 X 5 = -$125,000** - **Rough after additional marketing investment $365,000** - **Number of Units Year 5: 25** - **Number of Units Year 6 (5 from existing, 5 new): 35** - **Number of Units Year 7 (10 from existing, 10 new): 50** - **Number of Units Year 8 (15 from existing, 15 new): 80** - **Number of Units Year 9 (20 from existing, 20 new): 120** - **120 units X $1,000,000 = 120,000,000** - **Total from royalty = $6,000,000** ## Growth and profitability **Is a 120-unit brand that is growing at this rate considered successful? Absolutely.** - **Dunkin’: 11,300** - **Taco Bell: 7,072** - **McDonald’s: 37,855** - **Sonic: 3,504** - **The UPS Store: 5,000** - **Ace Hardware: 5,000** - **Planet Fitness: 2,039** **Is an 8-year growth plan too much?** - **Dunkin’: 1950** - **Taco Bell: 1962** - **McDonald’s: 1955** - **Sonic: 1953** - **The UPS Store: 1980** - **Ace Hardware: 1924** - **Planet Fitness: 1992** **Clearly, an 8-year run to 120 units would not be a bad run.** **What numbers do franchisors (those pushing growth) focus on?** - **Number of leads** **What numbers should franchisors (pushing growth) focus on?** - **Number of applications** - **Number of deals** - **Number of successful franchise openings** - **Number of franchisee validators** - **Number of franchisees willing to continue scaling with the brand** - **Profitability** **So, to answer the question of does size matters, again, it depends.** **Does size matter to you? Does profitability matter to you? What does happiness look like for you? What does winning look like for you?** **Success is in the eye of the behold — and the beholder is the franchisor.** ## Entities - 1851 Franchise (publication) - unit expansion (topic) - franchise growth (topic) - Franchise Industry (sector) - McDonald's (company) - Taco Bell (company) - Dunkin' Brands (company) - Planet Fitness (company) - Ace Hardware (company) - Sonic (company) - The UPS Store, Inc. (company) - profitability (topic) --- Originally reported by 1851 Franchise (https://1851franchise.com/in-franchising-does-size-matter-2713671). Summarized by Burnaze (https://burnaze.com/article/6bce8f4c-6114-414d-8b30-d678078c6230).