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How to spot a strong franchise opportunity

On Behalf of | Sep 30, 2022 | Franchise Law |

The allure of a franchise is indisputable. In many cases, you’ll benefit from existing brand recognition, a proven business model and actionable data. But there are no guarantees in business. Humans and their spending habits can be fickle. A wildly successful business model in one region can fail miserably in another.

Here are a few things to look for in a strong franchise opportunity:

Low to nonexistent competition in the area

In the excitement to launch a lucrative franchise, sometimes people overlook business fundamentals. Among your first tasks when considering a franchise opportunity is to do a competition analysis.

If the franchise already has a presence in the region, how close are the others? Are there businesses offering similar goods or services? If so, how are they performing? Do the demographics show that the area can support another player?

Thorough and strong data

A franchisor that can back up their proposal with exhaustive, balanced data is a good sign. Even if the franchise is relatively new, the franchisor should have a thorough, professional business proposal, ideally with datasets from one or more pilots. The data should be easy to understand. If you find yourself staring at a dizzying sea of charts and graphs in complete incomprehension, use extreme caution.

There’s no hard sell

A franchisor pushing you with unusual urgency is never a good sign. Of course, timing is key when starting a franchise, but any suggestions of a hard deadline or vague references to multiple people competing for the same franchise should be treated as highly suspect.

The franchise has a steady growth or low churn rate

There’s no such thing as a foolproof franchise. Failure and turnover are inevitable. Mistakes are made, inexperienced people get in over their heads and sometimes there are circumstances beyond someone’s control. But if the franchise has a steady growth rate and a generally low rate of closures, you can relax a little.

A franchise that will survive recessions

We are living in unprecedented economic times. Frequent recessions and near-recessions are the new normal. Will the franchise you’re considering survive tight economic times? Do independent research to answer this question.

You are certain you’ll love the work

Above all else, you should take time to consider whether you can maintain excitement about the franchise in the long-term. Despite the concept, franchises aren’t necessarily plug-and-play.

Even for well-known franchises, it is extremely rare for a new business to be successful right after launch. Be prepared to toil for a long time with little to no profit or even positive reinforcement. The only way you will survive that period is if you have a true passion for the work.

If you’ve done your due diligence and you’re still unsure about the profitability of a franchise, it might be time to seek professional consultation.