In the franchise industry, the sale of new franchises is often used to measure the strength of a franchise program. Fast growth franchise programs may be considered a predicator of success and some franchises have grown to thousands of locations. However, they represent a small percent of all franchises. This type of fast growth can lead a franchise program into trouble. An indicator of this can be found in the Item 20 category of the FDD, under Sold but not Opened (SBNO).
The impact from fast franchise growth depends on the ability of the franchisor to manage this growth. There are numerous examples of franchisors not being able to digest and administer to a large number of new franchisees. When a franchisor sells more franchises then they can handle, the program is headed for trouble. All new franchise programs have some hiccups during the early years of development but aggressively selling too many franchises can turn the hiccups into problems.
Knowing which franchises are a threat to your franchise network development requires diligence and the right information. You must know your competitors.