A Franchise Grapples with Hypergrowth
Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
Too much of a good thing too soon can be just that -- too much.
That's a lesson that the team behind Complete Nutrition, an Omaha, Neb.-based franchise, learned the hard way. The nutrition supplement retailer recently lifted a self-imposed 15-month freeze on new franchise sales after suffering the repercussions of hypergrowth. (The company came in No. 36 on Entrepreneur's 2012 list of fastest-growing franchises.)
"We will definitely take a sustainable business model over a growth business model any day," says Ryan Zink, Complete Nutrition's president.
Zink, 32, and Cory Wiedel, the company's 37-year-old chief executive and founder, opened their first Complete Nutrition store in 2005, after years of franchise experience in the nutritional-supplement industry. (Wiedel had been a 15-store franchisee for retail chain GNC, and Zink was a manager in the business.) The two launched Complete Nutrition so that they could offer diet, exercise and supplement consultation in addition to selling just products.
But even their combined years of experience wasn't enough to prepare them for the challenges of rapid growth.
They started franchising in 2008, and by January 2010 had 19 locations. The company planned to award 18 franchises that year. Instead, it awarded 245 franchises in 15 months, and turned away "a good amount" as well, Zink says, all without spending a significant amount on marketing or advertising.
Then came the growing pains.
A big hurdle was "having the capacity to keep up with the number of stores we've opened," making sure new people went through the proper training and that franchisees would be successful, Zink said.
"We just recognized that we didn't have the support they needed to get off the ground the way we had intended," including the ability to meet marketing and product demand, Zink said.
In March 2011, the company decided to freeze franchise sales for 15 months. During that time, they recruited and trained "the best office team that we could," hiring seasoned executives with experience in franchising, retail and technology from places like Applebee's and Cold Stone Creamery, he says. Home office staff jumped from 20-plus at the start of the freeze to 60 as of June.
They also had to let go several people who weren't a fit with the company's vision, Zink says.
"With quick growth sometimes come quick mistakes," he says.
The company also used the 15-month break to analyze the qualities of its best-performing franchisees. Zink says people who are passionate about health and fitness, not necessarily those with the most business experience, are strongest -- and the franchise is now targeting those individuals.
Now that it's regrouped, the company has ambitious growth plans once again.
As of mid-June, Complete Nutrition had 151 stores, and another 120 that are scheduled to open in the next three years, and a $103 million revenue projection for this year. The long-term goal, Zink says, is to be a $1 billion brand with more than 1,000 locations by 2025.
Have you experienced hypergrowth? What problems did you encounter and how did you manage?