Neck and Neck

2 Is Better Than 1 . . .

It seems being No. 2 isn't so bad-there's the goal of reaching No. 1 and having greater liberty to be more aggressive with aspects like advertising than larger, established chains that have more to lose.

So is it better to be an aggressive No. 2? "I think it's better to be No. 1," Spinelli says. "No. 2 is on the precipice, and small mistakes can be big failures. In franchising, the name of the game is growth and size." But, he adds, "Ray Kroc [founder of McDonald's] said, 'Green and growing, or ripe and rotting.' It fits for most franchise companies-fighting to be No. 1 is important."

From a franchisee's perspective, being part of an aggressive chain can be exciting. Andy McCook, franchisee of three Quizno's in Las Vegas, was displeased with the lack of support from the franchise he had previously owned and decided to look into Quizno's. He opened his first location in July 2000. The aggressive No. 2 mind-set has been advantageous to McCook, who says the support has been tremendous. "We [frequently] get new sandwiches, they remodeled the stores and paid for it, and the advertising is great." McCook was so thrilled with the franchise that he opened his second location six months after the first and opened his third in December 2003. He now plans to open several more.

Can being part of an aggressive franchise have any disadvantages? McCook hasn't seen any, but Spinelli does. "Sometimes a franchise will get ahead of itself," he says. "And franchisors or franchisees or both will invest a fortune in rapid development, but the marketing impressions don't catch up, and the understanding of the menu doesn't catch up with the product offering. And there's a ramp up in the sales that can be painful." Though he cites Subway as successful in strategically managing increased sales with aggressive store development, he warns other franchises from trying to replicate its formula. "So many variables can create a problem. It's easy to outgrow your capacity to service franchisees, or for market demand to absorb those new stores. These pockets of failure can bring down the whole plan," Spinelli says. "My hat's off to Subway for pulling it off, but I don't think they're going to be the norm" Instead, Spinelli feels the better bet is on Quizno's approach of aggressively targeting regional growth.

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This article was originally published in the January 2004 print edition of Entrepreneur with the headline: Neck and Neck.

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