It is crucial, as part of your franchise education, to compare your franchise territory to other territories in the system. Here are some specific areas to investigate.
Total population numbers
The majority of franchises are sold by territory. The franchisor sets the territory size required to support that particular franchise. Careful franchisors will not knowingly sell a territory that doesn’t have the population numbers to support their franchise. But they will sell territories that match their minimum criteria. If you are buying one of those marginal territories, you want to discover that up front, and you want to determine if the territory size is expected to increase or decrease in the foreseeable future. Ask the franchisor for the names of franchisees whose territories are similar in size to the territory you are considering. Call them and find out how successful they are.
Ask the franchisor for the normal radius for attracting customers. Is it 2 miles? 10 miles? Then ask for the names of franchisees who have population densities comparable to the densities in the territory you are looking at. Call them to find out how successful they are.
A futurist named Andrew Zolli summarized the importance of demographics:
“You can't understand the future without demographics. The composition of a society - whether its citizens are old or young, prosperous or declining, rural or urban - shapes every aspect of civic life, from politics, economics, and culture to the kinds of products, services, and businesses that are likely to succeed or fail. Demographics isn't destiny, but it's close.”1
When you study the demographics of your territory, you will be considering a number of factors, possibly including gender, race, age, income, disabilities, education, home ownership, number and value of single-family homes, and employment status. Will your franchise attract a broad demographic or does it have specific appeal? If the franchise serves a market segment - say students, wealthy homeowners, or small business owners, for example, does the territory you’re considering have enough of those customers? Is their average income and education level in-line with the franchises typical customer’s income and education? Ask the franchisor which territories are similar in terms of demographics. Call them and find out how successful they are.
Perform Your Own Research to Get the Best Franchise Information
In addition to speaking with existing franchisees, do your own research on current and projected population totals, population density, and demographics, including economic trends. You should be able to find information on line. Visit your local reference librarian to see what s/he has available. Additionally, your state may offer free services.
Don’t do the mistake of founding a franchise purchasing decision on your level of enthusiasm or on what you personally think will work. Make sure you have a market, and that the market is expected to stay the same or improve over the next 10 years (10 years is a common franchise contract term).
If you are ready to work hard, becoming a franchise owner can help you reach your financial and lifestyle goals. Just make certain to eliminate as much risk as possible. Do your research before you sign on the dotted line.