Most people are naturally attracted to trendy products and latest concepts. Weirdly enough, the success of franchising actually depends on business systems and models that have been executed successfully many times over. This does not mean though that you should shy away from hot or hyped franchise concepts even if they are based on new ideas.
However, investing in unproven franchise businesses comes with higher risk mainly because their systems and processes are still being modified and perfected as they go. Although new and trendy concepts are usually too new that evaluating long-term or key performance indicators do not really apply, below are some things you can pay attention to before investing in new franchise businesses.
The Management
Who is behind the franchise? Are they experienced franchisors? What is their business experience? Are they financially capable of building a successful franchise business from a new concept? Are they fully ready and capable of supporting the growing pains that come with a hyped and hot franchise?
Support and Training
Could the franchisor provide the necessary support for multiple franchisees? What specific operational support and training will you get?
Need vs. Want
Is the franchise business’ service or product answers consumers’ wants or needs? Ideally, a need is better because consumers will still buy it even in an economic downturn.
Innovation
Is the concept innovative enough? The franchise’s offering might be hot and trendy, but could it retain its luster in the long run? How is the franchisor planning to keep the brand popular and relevant?
Market Customization
Will you be able to customize the offerings of the franchise and make it more specific to your marketplace to help ensure a more sustainable stream of revenue?
Customer Retention
How is the franchisor planning on attracting new customers and retaining them? What is their customer service like?
Satisfaction of Franchisees
Once you decide to invest in the franchise and the franchisor finds you qualified for the opportunity, you will be given a franchise disclosure document that contains details about the franchise opportunity along with a list of current franchisees and how you can contact them.
Leverage the knowledge and experience of current franchisees by talking to them. Aside from asking the franchisees the questions above, it is immensely vital that you read and understand all the terms included in your agreement, as these will outline details that you will be legally obligated to perform and avoid as an official franchisee. You can also consider working with a franchise consultant or lawyer so you can understand everything in the agreement.
Investing your hard-earned money in a franchise is probably the biggest purchase you will make, second to buying your house, so it is essential that you invest in a franchise that is suitable for your business and personal goals. Ultimately, the ideal way to do this is by doing your own research and legwork. Pick a franchise opportunity with a practical and sustainable business model and work as hard as you can to increase your chances of winning in the game.
