How do you know when you’ve come across the ‘next big thing’ in franchising? Picking a winner is more than just loving the concept, you have to look behind the scenes to ensure the franchisor has the resources and ability to grow the franchise system to be a market leader in their segment and provide you with all the support that you need to run your business at its optimum. So what are some of the things you should look for?
Market Trends
Is there growing demand for the product/service provided by this franchise?
For example most of us are aware of the recent trend in consumer spending in health and well-being. Another significant trend that perhaps isn’t as widely known is the growth in pleasure and indulgence spending. Sectors such as indulgent foods, beauty and entertainment have also enjoyed terrific growth in recent times.
The interesting thing about these two trends – specifically in the food industry – is that while consumers are more health conscious, they are now looking to ‘reward’ themselves with high quality indulgent treats such as chocolate.
However, trends alone are not enough to ensure the success of a franchise concept, just look at the many juice chains that have failed.
People
The people make the system!
Do your homework on the team behind the franchise.
- What are their qualifications?
- Prior business experience?
- Do they have the ability to take the franchise concept from something that is ‘hot right now’ to a lasting winning business?
- Do they have expertise in areas such as Marketing, Finance, Operations, Research and Development, and Law?
- Has the franchisor invested in itself by hiring the right people and enough staff to give you all the support that you need?
Brand
One of the best reasons for franchising is that you can share in the benefits of an established brand.
Again, do your homework.
- Is the brand distinct and memorable or is it a ‘copy-cat’ that could be easily mistaken for a competitor?
- Is the brand attractive to the concept’s target market?
- Does the business enjoy brand awareness?
Research & Development You don’t want to buy into a concept that looks great today but loses its sparkle and relevance over time.
Ask your potential franchisor questions like:
- What is the annual budget for research and development?
- How often do you introduce new products or services?
- What is the process behind deciding which new products and services will be profitable?
If you cannot be satisfied that the business will continue to evolve to be relevant to the changing needs of the market and be able to respond to new competition, tomorrow, next year and in five years time, then you best consider another concept.
Intellectual Property Imagine the scenario where a competitor opens in the same shopping centre as you with a similar name and there was not a lot you could do because your franchisor did not take adequate steps to protect their intellectual property. You must do your due diligence and ensure that trading names and logos have been trademarked. You should also ensure that the copyright in all artistic work has been assigned to the franchisor. If they claim to have unique inventions or processes have they been protected by a patent? A franchisor who has invested in protecting their intellectual property demonstrates their commitment to protecting their brand and the longevity of their concept. This means greater protection for you as a franchisee.
Kelly Smith founded
Chocolateria San Churro, a fast growing
chocolate franchise in 2004. Prior to this she founded and ran a successful legal IT consulting company in the Netherlands. Her experience also includes intellectual property work for Allens Arthur Robinson and management at a number of restaurants in Brisbane and Sydney.
7-Jan-2008