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About 60% of all franchise opportunities have less than 50 units.

Written by: Jim Coen

Article Overview: There are over 2500 franchise opportunities operating in the U.S., some of these franchise opportunities are larger systems but most of them are smaller emerging systems. About 60% of all franchise opportunities have fewer than 50 locations, so you’ll have a bigger choice if you opt for the newer, smaller systems.

About 60% of all franchise opportunities have less than 50 units.

One big feature of up and coming franchise opportunities is that they tend to be in an un-crowded industry that is not overrun with competitors. Management is more flexible and encourages participation from the franchisees. Very often there are more prime real estate or territory opportunities with emerging franchise opportunities.

It’s important when considering smaller franchise opportunities to ascertain what is the advantage of the franchise opportunity, why are they franchising, what benefit does the franchise offer the franchisees and its consumers? It’s a good idea to spend a day with a franchisee, and get very close to the owners. In other words get comfortable that the franchise offers value and that it is sustainable.

Another good thing is weigh the background of the key players, in other words the franchise may be a newer system, but there may be substantial experience and knowledge in that industry or in franchising. Check the background of the owners and key executives.

No matter what the size of the franchise, look for a franchise that has passion, a passion for product quality, a passion for its customers. Franchise opportunities that listen to their franchisees and customers, and have superb management teams and carefully selected franchisees, those are systems you’ll be proud to join. Those are franchise opportunities with bright futures.

Jim Coen, of Franchise Perfection, www.franchiseperfection.com is a franchise consultant, based in Chestnut Hill, Mass. Jim is on the Board of Directors of the New England Franchise Association Network (NEFA), the regional franchise trade organization.

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It's not easy - Evan, It's not easy to franchise a business! Franchising requires a strong business model, significant capital resources, and very talented people to be successful. There are over 3000 franchise opportunities out there, most (80%) don't have the three criteria I listed above. The biggest benefit to using franchising to grow your business is that you bring in someone else's capital and human resource. What you are giving up is control in operating that business. I have seen successful companies get in trouble attempting to franchise their business, franchising requires a different skill set than simply operating units. Growth would have been much easier if they had just opened their own units and sought grown from within.
Re: Fed rate cuts . . . - Prime may be down but the Lender's tightened up, so the rate going down really doesn't help the avarage Joe or the fair credit borrower. Seems that pro-franchise Lenders all over the country all raised their standards. Where I used to be able to get someone franchise financing with a credit score of 650 and minimum collateral (30- 40%) with little management experience or no direct industry experience; the Lender's now want credit of 670+ and 50 - 70% in collateral on a minimal level (depending upon the lender and the franchise) and they are all requiring stronger & related experience (industry experience preferred). New franchises to the franchising industry are very hard to get financing for, unless you are a really strong borrower with strong related experience. If you are opening a restaurant franchise, the lenders want to see you have restaurant and management experience. Lenders also want to see a long track record with a franchise and they want to see 75+ units up and running successfully before they put down their guard. These are truely tough lending times and i don't really think the lower rate helps the avarage person.
Re: Which franchise would you buy? - [quote="FranchiseBaby.com":gqt15h3m]Switching gears here, earlier in this topic thread I talked about Tim Horton's franchises. I have a new one I would like to add to me dream list! Arby's. I would love to bring an Arby's franchise to our little town. I would be my own best customer, but I know I wouldn't be the only one lining up.[/quote:gqt15h3m] Absolutely! Not only is their product line unique but the Arby's franchisees are some great people! I had the opportunity to be around one of the larger franchisee companies in the system (at least 40 or 50 units owned I believe) and what a great franchise - not sure how they are doing of late, especially since merging, but it would be interesting to hear, anyone have some insight?
Non-medical homecare franchise business model - I talk to people all the time who ask whether a franchise will work in a particular market. The answer, as I learned in law school, is "depends." It depends on whether there are many other providers of that service as independents or franchisees in the market you are looking at. It depends on the barriers to entry for others to start a similar business in the market or for a franchiser to sell a franchise offering similar services in the market; it may also depend on how the market is split into "micro-markets" of sizes that one franchise may serve. If, for instance, an established metro area with all kinds of services and shops is naturally expanding for some reason, then new areas will open up and create new opportunities for new franchises. One other thing to consider is the role law and regulations may play. I live in Virginia, a franchise registration state. Many franchisers avoid Virginia because of that fact. There may be franchise systems with hundreds of franchises and none in Virginia. If you live in a registration state, contact a non-registered franchise and see if they will get registered to possibly make a sale to you.
How Do I Start Franchise? - How do I start a franchise? Before one can start a franchise it is important that you do your homework and research your market thoroughly so that you know what you are getting into. To start a franchise, it is vital that you: First, investigate all the franchise opportunities available to you by visiting franchise trade shows or by contacting a franchise agent. Also talk to family, friends or relatives who have set up a franchise, or who know some one who has set up a franchise. It is good to get as much information as possible from fellow franchisees, as not all franchises are good investments Second, talk to franchise owners that are in a franchise similar in to the one you would like to invest in. Ask them if they are pleased they are with their decision, and how well their business is doing. Is it meeting their expectations? Also ask questions about the franchiser and how responsive it is. It is important to determine the integrity of the franchiser you are interested in doing business with. Third, consult any and all advisers. Have an accountant review the audited financial statements the franchiser presents you with, and bring in a lawyer to help review all the legal documents before you sing them. Fourth, thoroughly read the Uniform Franchise Offering Circular, which is a disclosure document in which the franchiser must release certain information such as, any and all administrative, criminal or civil litigation currently pending or completed against the franchiser involving allegations of fraud or misrepresentation. It is a recommendation of the FTC that all franchisers supply a UFOC to prospective franchisees. Also make sure to verify and confirm the UFOC facts. Do a background check on the history and experience of the franchise and its employees. Fifth, compare other franchises. Look for franchises similar to the one you are interested in investing in, and see how well they are managed and financed. Sixth, know and be fully aware of all the terms and conditions of the purchasing contract you are about to sign. Seventh, research as much as you can. Buying a franchise is a complex process and should be approached with caution. The more information you know, the better it is for you. Remember, only you can determine if owning a particular franchise is right for you. When starting a franchise it is key that you evaluate yourself and see if a franchise is the right business investment for you. Investing in a franchise should not be taken lightly as it can be a risky business. It is important that you consider all the facts before you make a decision to invest in a franchise.


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