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Factors to Consider in Determining Whether a Franchise Will Work in Your Area

Written by: Michael Hemenway

Article Overview: Whether your franchise will work in your area or not will depend on various market factors. Prominent among them are the age-group, income-level and ethnic-diversity of the population in the targeted market.

Factors to Consider in Determining Whether a Franchise Will Work in Your Area

With everyone jumping into the franchising business bandwagon, it’s quite natural that you may also have given thought to it. What's more, the superb restaurant that you had visited during your last holiday is currently franchising and you want to bring its offerings in your city. But before you take the plunge and start signing the franchise agreement papers, consider the following factors:

• See the population: The first thing you are supposed to do after you have decided to step into the franchising industry is carrying out comprehensive research of the target market. Most franchisors will tell you how much population is needed to sustain their business. If the business flourishes only in areas where there’s a huge population, then a small-town area is not a good choice for such a franchising concept. Similarly, check the population density of the target market. Will people in your area drive a good distance to avail your products/services? Compare the population density of your area to that of the areas where existing, successful franchisees are present. If they are nearly the same, then your chance of success is pretty good!

• Check the income level: Income level of your market will be a big factor behind the success-rate of your franchising business. If you opt for a maid-services franchise, which is a luxury to many from a low-income region, there will be little number of clients for you. But a check-cashing or payday loan service franchise will work absolutely fine in such areas.

• Consider the age-group: Like the median income of the market, the age-group of the population will hugely influence the working process of your franchising opportunity. In a young and family-friendly area, franchises centering to children can enjoy a steady growth-rate. Home-retail, handyman and maid-services franchises too will flourish in such areas. In neighborhoods full of retired and semi-retired inhabitants, health, fitness and senior-care franchises can do considerably well.

• See the ethnic diversity: This is certainly a big factor, especially in the food and restaurant franchising industry. If you are planning to open a specific region-food, for example Mexican or Chinese, then the ethnic people of that region should have a good presence in the targeted market. But this does not always hold true for big cosmopolitan cities where people love to experiment with their taste-buds. But for smaller cities, this may turn out to be an important factor.

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Article Tags: age group, bandwagon, comprehensive research, franchise agreement, franchising business, franchisors, handyman, health fitness, inhabitants, loan service, maid services, median income, offerings, payday loan, plunge, population density, service franchise, success rate, successful franchisees, target market



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Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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