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What makes a good franchise opportunity?

Written by: James Greig

Article Overview: Want to buy a franchise, but not quite sure what to look for? Here is a quick guide to help you evaluate the franchise opportunities you are considering.

What makes a good franchise opportunity?

A good franchise opportunity will have all of the following things:

Well-known respected brand

While it doesn’t ensure success, buying a franchise of a well-known brand will certainly be a lot easier than investing in one that hasn’t established itself yet.

An established company means brand awareness and guaranteed customers for your franchise, which will save you a lot of work and stress.

Experienced franchisor

Something that goes hand-in-hand with a well-know brand is an experienced franchisor – if they’ve built their business into a successful franchise, they obviously know what they are doing.

Look for a franchisor that has a variety of experts in the management team (a franchise expert is essential, and so is marketing and finance), has been working with the business model for a long time and has streamlined systems and processes.

Good location

You know what they say – location is everything. You need to be able to operate your franchise business from a place that suits you and suits your target market.

Make sure your location isn’t already full of your competitors and that you have a large enough marketing area and population to attract new customers. When it comes to your premises, make sure you can afford it and also that it meets the needs of your market.

Quality product

If the franchise doesn’t have a good product, you’re wasting your time and money. It needs to be high-quality, marketable and priced competitively so you have a chance at success.

The franchisor should invest a significant amount of their profits into research and development so they can continuously improve the product. It also helps if they and you are passionate about what you are selling.

Profitability

When it comes down to it, money will be the most important factor in your decision to buy a franchise – if it’s not profitable, then it’s not a good franchise opportunity.

Once you get past the initial enquiry phase in the franchise process, you will get access to detailed financial information about the franchise. Get an expert to go over the information with you to find out if the business is profitable – look at things like franchise fees, residual income and resale value of the business to determine if it is a worthwhile investment.

Support

The main reason why people choose franchise businesses over starting from scratch themselves is because they don’t want to go it alone – so make sure the franchisor offers adequate support.

You will need initial and ongoing training on the products, the industry and running the business, as well as technical and marketing support and access to a franchise manager to help you overcome challenges and keep you motivated.

Suit your situation

This is probably the most important part of a good franchise opportunity. It’s essential that you choose a franchise business that suits your personality, your schedule, your goals, your budget and most importantly your skills.

If you’ve done some research into a business and aren’t sure if it’s for you, go and chat to some of its most successful franchisees and find out what they are like. If you have a lot in common with them, then you’re on the right track. Also, it’s important that you be honest with yourself about what you can do, what you can afford and what you want to achieve.

A final word of advice - make sure you do your research so you can make an informed decision about the franchise opportunity. Choose one that meets the criteria above and you’re off to a great start!

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Article Tags: brand awareness, business model, buying a franchise, established company, franchise business, franchise expert, franchise opportunity, franchisor, hasn, management team, market quality, premises, profitability, profits, quality product, research and development, suits, target market, time and money, wasting your time



Related Forum Posts
What makes a good franchise? - I have yet to find a comprehensive list of what makes a good franchise opportunity. What are the main components that entrepreneurs should look for before buying into a franchise? Any ideas from our expert forum members?
Re: 40 cents per dollar is spent in a franchised business - Hi Kevin and John: I definitely agree that it's a personal choice, but what makes it hard is that it is in essence a business decision as well. the mixture of the two and the weighing of each aspect makes it a difficult choice for me to understand. John, what kind of things go into the due diligence part? i think there must be more beyond understanding the nature of each franchise...such as the fit of the franchise with respect to location etc. owning a no-frill pizza franchise in a ritzy lifestyle-conscious neighborhood might not be as good as say a healthy juice-bar type of franchise etc. any market research help available out there?
Franchising vs. Licensing - While Ken's definition of a franchise is correct, I disagree with his statement that a franchise and a license can mean the same thing. A franchise [u:2pwsjr5r]contains [/u:2pwsjr5r]two licenses. A trademark license (the name and fee) and a business opportunity license (a system and a fee). The combination of those licenses in the same relationship creates a franchise. If you want to license a business opportunity, you need to tell your licensee that they [u:2pwsjr5r]cannot use your trademark[/u:2pwsjr5r]. If this is your growth strategy, you will neglect to build a brand. While that is not always important, it often is. We tell our clients not to think of whether a particular business relationship will be, but instead to structure the relationship the way it makes sense from a business perspective. If it then turns out to be a franchise or a license, then so be it. The difference in cost between the two forms of expansion, done properly, is not very signficant. If you are interested in learning more, I would be happy to send you a free copy of a one hour seminar on "How to Franchise a Business." It goes into some detail on this topic. You can write to the email below or get it on my website.
What is the Best Franchise? - As a Franchise Consultant I get asked this question on a daily basis. I work with clients to help them find the right franchise and through those conversations they almost always as me: "What is the Best Franchise?". There is no single answer for this question as the answer truly depends on the criteria you set as a perspective franchise owner. Meaning, maybe you want a retail location with 5 employees or a home based franchise with zero employees. Either way, the word "best" becomes relative to what is important to you. I realized quite some time ago that I could never "sell" a franchise to anyone. The only way someone will buy a franchise is if it makes sense for them & their family. Performing the proper due diligence is key to finding the best franchise for you.
How to Evaluate a Start-Up Franchise - Every mature franchise chain you see today was once a start-up franchise with just a few locations. Success didn't happen overnight and it didn't happen with good luck, either: many factors were involved to take a one or two location franchise national, even international. Without a doubt, one of these factors is the willingness of a few risk-tolerant franchisees to jump on board a budding concept and help it to grow. At least twenty new franchise concepts are being born every month, one of them which may have caught your eye. But before you buy, here are some warning signs to look for when evaluating a start-up franchise venture that looks good from far, but may actually be far from good.


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