A franchise business can be an amazing opportunity and a way to run a business with support from experts. Whether you’re already an experienced entrepreneur or looking for a career change, a franchise can be a good idea. But how do you know if you have spotted the right franchise? A good opportunity will have these signs.
- Industry growth. What is the potential for growth in the industry that the franchise is in? Some franchisors will give you market research on the industry, but don’t rely on this information alone. Do some of your own research as well. You need to know about the growth potential in your local area as well. For example, hipster coffee shops might be booming in other cities, but if your local area already has several well-loved coffee shops, this won’t be a good opportunity for you.
- Unit growth. Look for an ongoing increase in the number of franchise units, which shows that a franchise is succeeding. One big benefit of buying a franchise over starting a business from scratch is that you have the franchisor’s name and brand recognition to get you started. The more units that are open, the more brand awareness there already is.
- Strong support from the franchisors. What kind of training and assistance do the franchisors offer to help you get your business up and running? What help will you get after you open? Even a small franchise system can be a good opportunity for you if there is a lot of support on offer. Look at Franchise Direct to get started.
- Good management. Find out about the people who are behind the company and their experience in franchising. Running one successful gym is one thing, but it’s another to grow a franchise of gyms. How long has the company been franchising? Meet with the management team, and the franchisee support staff to get a feel for what it might be like to work with these people every day.
- Marketing and advertising support. What kind of marketing and advertising programs does the franchisor have in place? Are they making use of new trends that others in the industry use, like online marketing or social media? You will likely have to pay a monthly royalty, so make sure you’re actually getting something out of what you’re spending for this support.
- Satisfied franchisees. Talk to both current and former franchisees to try to get honest feedback of the franchise system. If all the franchisees are unhappy, or even worse, they are suing the company, this is a clear sign to stay far away. But if you find that the franchisees you talk with love their business and are happy with the support they get, this is a good sign.
- Adequate earnings. Can you realistically make a living from the franchise? To find out if you can, you will need to estimate your potential earnings. Some franchisors will give information on average earnings, which can be useful. For others, you will need to work out an estimate for yourself by talking to other franchisees.