Hard to believe that we’re heading into the third quarter of 2019 in just a few days. It’s been a good year – a very good year – for franchises. And, if you’ve been considering opening up your own business – without the intense start-up headache phase, it’s the perfect time to start exploring what’s involved in purchasing a franchise.
The franchising model works this way – you (the franchisee) buy the rights to market and distribute the products and services of another company (the franchisor) and to use its business name.
Since you’re “borrowing” another company’s proven business model, brand recognition, and reputation, franchising can be a safer option for starting a new business.
So, let’s take a look at a few franchising trends you need to consider before you invest your hard earned money buying a franchise…
1. Is There Market Demand For Your Products And Services?
Do you already have an idea of the kinds of products and services you’d like to offer? Awesome!
Do you know if those products and services are in demand where you want to open your business? The only way to answer that question is through market research and hard data. What sells well in other areas of the country may not be well-received locally.
Are you a BIG thinker? Are you thinking about the possibility of branching out to owning multiple outlets in the future? Then, you need to assess the potential for that as well.
2. How Good Is Their Industry Reputation and Track Record?
Does the company offering the franchise have a proven track record of successfully franchising their business? Just because a company is offering franchising opportunities doesn’t mean they are a good franchisor.
It’s imperative that you do your due diligence. You should speak to current franchisees to get their perspective on the business – the good, the not-so-good, and the flat out ugly. A good question to ask is, “If you could do this all over again, would you have picked this company to be your business partner?” Be sure to listen to the different responses you get. If something negative is repeated often enough, you can be sure that it’s a red flag.
3. What Does Your Investment Buy You?
Franchise fees represent a considerable portion of your investment – that number can range from a few thousand dollars to several million. Those fees typically cover training, equipment, and licensing rights.
You need to understand what the franchisor will be providing you for your investment. You need to carefully evaluate the time it will take for you to earn your upfront costs back to determine if the franchise you are considering is a sound investment.
4. What’s The Competition Like?
Depending on how well-known the franchise is, there may already be lots of franchisees operating in the same area you want to open shop. And, depending on what your product or service is, there could be a lot of other rival companies.
Some competition is a good thing. Too much competition means the market could be over-saturated. That is not good for business.
Product and service offerings are a STRATEGIC business decision that you need to consider carefully. If you have a lot of competition, it will be much harder (and more expensive) for you to establish yourself.
If your products and services are unique, then competition will not be an issue. However, educating the public and creating market demand might be.
5. How Much Training Do You Need?
I’ve found that one of the significant advantages of franchising is the training and support offered to franchisees.
If you don’t have a lot of business and operational experience, I highly recommend choosing a franchise that offers substantial training and support to ensure you get things started the right way. Some franchisors even provide on-going support after your franchise is up and running.
Statistics show that having the proper guidance and training from the start dramatically increases the chances of your franchise being successful.
6. Do You Have An Issue With Rules and Regulations?
It’s not uncommon for franchisors to impose specific rules and regulations on how their franchises are to be run.
They usually require franchisees to follow specific guidelines and standards which can encompass things such as product offerings, prices, operational hours, store design, and other things.
While you may be the boss, the franchisor generally has the majority of control. If you’re not comfortable in a situation like this, then running a franchise may not be what you’re looking for.
New Franchise Owners Are In Demand
As I mentioned earlier, this year is shaping up to be a VERY good year. The competition for new franchisees has never been greater.
Franchisors are finding new and more innovative ways to craft different offerings to attract new franchisees who normally would not consider investing in a franchise.
These franchising trends have created a highly competitive franchise buyer’s market. And, it’s up to you to seek out and invest in a strong brand with solid business fundamentals and high growth potential.
Look for a franchisor who is focused on doing everything they can to help you succeed. It’s smart business on their end. Your success will fuel their growth and ultimately their enterprise value.
The marketplace will always reward business owners who can carry a brand forward, build sales, profitability, and create exceptional value based on the strength of their experience.
I’d love to hear from you now.
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If you have any questions at all, please post them in the comments or send them to me at Todd@TheFranchiseConsultingCompany.com. I’m more than happy to help if I can.
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