Reading the Signs: What to Look for While Researching a Franchise
February 28, 2022
Franchising is an exciting opportunity for many people. It offers a lower-risk path to business ownership. But you can’t possibly learn about them all. And researching concepts without a well-defined plan can cost you valuable time and leave you feeling frustrated and stuck. Take the guesswork out of your franchise search. Look for these common characteristics of the top franchise opportunities.
Common Characteristics of the Top Franchises
Most franchises have a time-tested business model with proven success in multiple markets. But not all franchises offer equal opportunity and upside. Here’s what to look for as you evaluate your options.
Winning Business Model
Buying a franchise allows you to start a business without creating it from scratch. The path to profitability is usually shorter, but you need a winning business model to catapult yourself to success. If the business model isn’t right, your revenue and eventual profits could be affected. You should have confidence in the franchisor’s customer value proposition and profit-making formula. Scalable, recurring revenue business models can be especially lucrative.
You’ll review the franchisor’s “earnings claims” or “financial performance representations” during the discovery process. Consider it a serious red flag if the franchisor is reluctant to share financial reports with you. The growth of existing owners illustrates your earning potential.
Centralized Marketing Strategies
Marketing is the engine of business growth for every franchise. You should receive marketing support, including national advertising campaigns and resources for local marketing efforts. Be wary of franchises without a centralized marketing strategy. Every franchise owner must then fend for themselves, resulting in disjointed marketing plans.
Effective marketing strategies are a strong competitive advantage to fast-track your success. If no one knows who you are or what you do, you will have a hard time getting people to purchase from you. Recognizable brands have an easier time gaining customers and growing their business. Plus, joining a well-known brand allows you to tap into an existing customer base that would take time and resources to build from scratch.
Comprehensive Training & Support
Franchisors want their franchise owners to succeed. Your success is their success. You should receive access to a training program and operations manual to run the business. Ongoing support and one-on-one business coaching should also be available. This will ensure you’re staying on track to achieve your business goals. Support should be available for everything related to the business, from operations to financial reporting. Otherwise, you may waste time spinning your wheels without progress.
Franchise Industry Awards
National and local franchise awards show credibility. They can also help you narrow your search and make better-informed buying decisions. Franchise market research firms are a great place to start. Two of the most well-known are Franchise Business Review’s annual Top 200 Franchises and Entrepreneur’s Franchise 500. Based on franchise reviews and ratings, you can learn about the top low-cost franchises, franchises for veterans, recession-proof franchises, franchises for women, and more. They can also give you insight into franchisee satisfaction, earnings potential, and support.
The franchisor-franchisee relationship can determine your success or failure. This is especially true for first-time business owners or those with limited entrepreneurial experience. Remember, the franchisor is teaching you how to run a successful business using its established model. They should be trustworthy, supportive, and caring about you and your business.
You’ll also speak with existing franchise owners during the validation phase of the discovery process. Be sure to ask them about the franchisor-franchisee relationship. Who better to hear it from than someone within the franchise system you’re considering?
- There are hundreds of thousands of franchise concepts to choose from. It’s important to know what characteristics to look for while evaluating your options.
- You should have confidence in the franchisor’s customer value proposition and profit-making formula. If the business model isn’t right, your revenue and eventual profits could be affected.
- You should receive access to a centralized marketing strategy, with national and local campaigns to drive customer recruitment and revenue.
- You should receive training and ongoing support from the franchisor in every aspect of the business, from operations to financial reporting.
- Franchise industry awards can help you narrow your search and make better-informed buying decisions. They can also help you find franchisees that excel in the aspects most important to you.
- The franchisor-franchisee relationship can determine your success or failure. Ask about the existing owners’ experience working with the franchisor during franchise validation.