Knowing When to Exit: The Entrepreneurial Lifecycle
BY DEAN zUCCARELLO, CEO, & CARTY DAVIS,
PRINCIPAL, THE CYPRESS GROUP
In many respects, the restaurant and franchise industry is no different than most other industries. It experiences
cyclical ups and downs and changing
consumer preferences and is affected by
similar economic factors encountered by
manufacturing and service industries.
between the two and coordinating
them to help facilitate a successful
exit strategy for the franchise/
restaurant entrepreneur is important.
The E-curve can be segmented
into the four following stages:
multiple units as additional markets
are secured and same-store sales
experience strong growth. The
operator’s passion and enthusiasm
generally peak during this period.
However, a key difference that
distinguishes the franchise and
restaurant industry from others is
the composition of its underlying
ownership. Unlike other industries,
comprise the majority of ownership
in the franchise and restaurant
industry. While the industry has its
share of publicly traded companies,
such as McDonald’s, Wendy’s,
YUM, and others, its main engine is
fueled by entrepreneurial activity.
STAGe 1: Inception/Start-Up. The
owner/operator conceptualizes a
restaurant or buys into a franchise
concept, identifies a core market,
raises capital, and begins marketing.
Risks are high, but hopes are higher.
STAGe 2: Expansion/Growth. The
entrepreneur proves his or her
concept a success and scales it into
STAGe 3: Maturation. The concept
reaches a level of critical mass and
develops some operational inertia.
Profitability and size peak, but overall
growth rates tend to slow as the concept/
development matures. During this
stage the successful franchisee and
operator often finds himself reaping
the rewards of success and devoting
less time to the day-to-day demands
of the business. Asset diversification
becomes a consideration, liquidity
The E-Curve: The Entrepreneurial Life Cycle
It is important to recognize that the
ultimate objective for most restaurant
and franchise entrepreneurs is the
profitable sale/transfer of their business
or a related exit strategy. In many
cases, an entrepreneur views such a
liquidity event as the final, one-time
windfall that will provide for retirement
and long-term financial stability.