Within the franchise industry, Koala Insulation has become the go-to example for the power of this business model.
Given the success of the franchisor, it isā entirely merited. Hereās a timeline of events for you:
- 2018: Scott Marr starts an insulation business
- 2020: Scott Marr starts franchising his insulation business
- April 2023: Scott Marrās business (Koala Insulation) gets acquired for ~$90 million
Within 5 years of its founding, and less than 3 years into the franchise journey, a boot-strapped founder got a ridiculous exit (and it may have been even higher than $90M).
Mind you at the time of acquisition, the brand had 350+ territories sold, and at least 326 of them open.
That is insane growth.
Koala is a shining example no doubt, but itās important to remember they are largely the exception, not the rule i.e. most franchises will not achieve that exit in such a short period.
That said, credit to Scott and his team - if you listen to my podcast conversation with him, youāll hear him talk a lot about how franchising is all about how quickly you can transfer knowledge to new franchisees.
He clearly knows a thing or two about that given the speed his brand was built.
What About the Franchisees?
Whenever a brand grows quickly from a āunits in developmentā standpoint, my first 2 questions are:
How many of those are actually getting open?
How many of those are staying in business?
Brands that award a ton of franchises at a rapid pace need to be able to handle the influx of franchise owners. If they canāt train them (aka transfer their expertise to someone who has never run that business before), and continuously support them, things can get messy quickly.
In 2022, they closed/terminated ~10% of their franchise base (29 closed, while they started the year with 248 territories).
However 2023 showed that things have stabilized, with just 1 closure out of 326 territories to start the year.
Today they have 386 territories operating, and they give insight into their 2023 fiscal year, with data from 76 franchisees that operated 284 territories:
- Average revenue: $942k
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Highest performer did $3.4M
- Lowest performer did just $112k
- Single territory franchisees averaged $717k
No profit data from 2023 was reported, but insights into 2022 show that you can (likely) generate cashflow.