When Challenger Brands Shrink to Grow

Imagine telling your most loyal fans you’re pulling out of their city. Overnight, you’re in the headlines — and not the good kind. Social media piles on, competitors circle, customers lose faith. On the surface, it looks like decline.

And yet, for some brands, closing locations isn’t failure. It’s the boldest move they can make to ensure the company survives — and thrives — in the long run.

That’s the paradox of being a challenger brand: sometimes winning means stepping back.

The Challenger’s Dilemma

Growth is intoxicating. New stores, new markets, new press releases — they signal momentum. But for many multi-unit and franchise brands, expansion can outpace stability. Locations underperform. Franchisees lose confidence. Resources stretch too thin. And when operational resources are stretched, the cracks show: product quality slips, service falters, and even loyal customers begin to drift. That’s often the hidden cost of unchecked growth.

The temptation is to hold on at all costs, fearing the optics of contraction. After all, what will customers think? What will the press say? Will fans equate fewer locations with a weaker brand?

Their strength comes from focus, from sacrifice, from making deliberate choices that keep their brand’s purpose sharp.

Sometimes shrinking is the only way to protect long-term growth and this blog post, “What Makes a Challenger Brand Different”, reinforces that challengers thrive by zigging when others zag.

Why Shrinking Can Be a Challenger Move

To outsiders, closing stores looks like surrender. To insiders who understand challenger thinking, it’s an act of discipline and clarity.

• Courage over optics: True challengers are willing to take a PR hit today to secure their future tomorrow.
• Sacrifice & focus: Challenger brands define themselves as much by what they don’t do as by what they do. During the 2008–2009 financial crisis, Starbucks announced the closure of about 600 U.S. stores — nearly 8% of its footprint. Painful in the moment, the sacrifice gave them breathing room to retrain baristas, recalibrate supply chains, and restore the customer experience that had made the brand special.
• Lighthouse identity: In moments of contraction, a challenger’s lighthouse identity shines brighter. Starbucks recommitted to its “third place” promise — a single-minded narrative that reminded customers what it stood for, why it mattered, and why the sacrifice was necessary.
  

In other words, shrinking isn’t weakness, but aligns with the idea that focus and differentiation matter more than trying to be everything to everyone. Pruning a business is often the clearest expression of discipline. Just as gardeners prune a tree so it can bear more fruit, brands sometimes need to cut back to build stronger roots.

The Risks (and the Rewards)

Of course, this kind of decision is not without risk:

• Perception hits: Negative headlines, questions about stability, customer doubt.
• Fan disappointment: Loyalists who feel abandoned in the markets you leave.
• Internal strain: Franchisees, employees, and teams questioning leadership.
  

But the rewards can be transformative:

• Healthier unit economics: Protecting the viability of the stores that remain.
• Sharper focus: Concentrating energy and resources on the markets where you’re positioned to win.
• Capacity to reinvest: Freeing up capital to innovate, modernize, or expand later with more strength.
  

For Starbucks, the payoff was clear: after retrenching, the brand returned to stronger growth, profitability, and relevance — a turnaround Forbes later called “remarkable,” as they analyzed how it revamped operations, redesigned stores, and reengaged its customer base.

The Challenger Agency Perspective

Moments like the one discussed above are not seen as defeats, but as defining moves. Challenger brands can’t win by being everywhere or pleasing everyone. They win by having a clear lighthouse identity — a story that rises above the sea of sameness — and by making the sacrifices necessary to protect it.

These are the moments that separate brands simply trying to survive from those positioning themselves to thrive.

Challenger Questions for Leaders

If you’re leading a brand today, ask yourself:

• Where does growth mask deeper cracks in your operations?
• Does your lighthouse identity shine clearly enough to guide hard decisions?
• Which markets, products, or practices are quietly draining your strength?
• If forced to choose between protecting today’s footprint or protecting tomorrow’s reputation, which would you choose?

Challenger brands succeed not by spreading themselves thin, but by competing with focus and clarity.

Guts and Glory

Challenger brands win not because they play it safe, but because they make moves others are too afraid to make. Sometimes that means closing stores. Sometimes it means risking fandom or weathering bad press. Always, it means having the courage to choose long-term brand health over short-term optics.

Because in the end, shrinking isn’t failure. For challenger brands, shrinking can be the purest expression of sacrifice, focus, and a lighthouse identity that guides them toward the future.

JULIE ONDRUSEK is director of client service, partner at LOOMIS, the country’s leading challenger brand advertising agency and a top Dallas advertising agency for digital, social, mobile and user experience. For more about challenger branding, advertising, and marketing, leadership, culture, and other inspirations that will drive your success, visit our blog BARK! The Voice of the Underdog and catch up on all of our posts.

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