How to effectively research a new franchise venture
Whether you’re already involved a particular industry or have absolutely no experience in the field, it’s vitally important to carry out research into any new venture.
If you’re a teacher who suddenly has a hankering to open your own beauty salon, no-one is expecting you to become an expert overnight – that’s why franchises already have systems in place to help guide you through. However, for your best chance of running a successful franchise you need accumulated knowledge – preferably as much as possible. If you’re not sure how to go about researching a franchise and its industry, here’s a guide below.
Immerse yourself in research step by step
Firstly, scour franchising advice sites, magazines and books as these are a great resource tool. Many articles will have invaluable advice and what to bear in mind when doing your research which will sharpen your focus. If you are not sure as to what kind of industry you’d like to get involved in, often these resources will help spark ideas.
Next you should gain as much insight as possible into the industry of your choice and key businesses. This is enormously important if you do not have prior experience in the industry. Research online articles and reports. Identify leaders in the industry and study their success. Check out the comments about certain businesses on social media by looking up their Facebook and Instagram pages. Examine their websites and observe if what they say resonates with you.
Once you have identified a particular franchise business you’re interested in, read up on whatever has already been published about them. If there are favourable articles it shows the company cares about its brand and reputation. Also Google reviews of the business to see what customers are saying. This could yield interesting information as to the business’s reputation.
Finally, it’s also important to do research on competitors. Search online sites such as the Yellow Pages website to see who the business’s main competitors are and how many exist in various areas. Read up on competitors and visit some of the premises to check out how they operate.
Ask the franchisor important questions
It’s vital to set up a meeting with a franchisor you’re interested in and ask them the right questions. Although bear in mind that franchisors are also likely to talk up the business as much as possible, so keep whatever they say in perspective. Some important questions to ask include:
• What is your knowledge of the business’s competitive landscape and what is your immediate and future strategy for competing in that arena? Assess whether the strategies sound viable.
• What is the main focus for your company? Preferably it should be the success of the franchisees.
• What is the reason some franchisees are doing better or worse than others? Understand exactly what is not working for certain people.
• How do you deal with conflicts? Ask about a recent conflict with a franchisee and how the franchisor dealt with it.
• What skills do franchisees need the most for this business? You need to be the correct fit for the business. For example, my fitness franchise 12 Round Fitness (12RND) is a purpose-built boxing and functional strength training facility. As our focus is on members’ results and relationships, our franchisees need to enjoy interacting with people and motivating them.
Do your research on the franchisees
There are a few ways to go about this. You can visit one of the franchisees and ‘secret shop’ as a customer, observing how the business is run without letting on that you are interested in the business yourself! You could also casually ask the owner how business is going which hopefully will elicit an honest response. Another option is to ask the franchisor to recommend a franchisee you can spend some time with – although remember they will probably recommend their most successful one. If you’re concerned about bias issues, you could cold call a couple of franchisees yourself – their numbers will be in the franchise disclosure document. Set up a meeting with at least one franchisee and pose these important questions to them:
• Were you well prepared when you opened? Assess whether the franchisor’s training program was thorough enough.
• Do the marketing programs work? Ask if the campaigns actually bring customers through the doors.
• What are the financial details? Ask the franchisee about their start-up costs and how quickly they began making money.
• Would you purchase the same franchise again knowing what you know now? Take note if their answers resonate with you, or if the issues they raise are irrelevant. If you find yourself identifying with unsatisfied franchisees, it may not be the business for you.
Study the franchise disclosure document (FDD)
Understand that anything told to you verbally isn’t an iron-clad guarantee and that you should be ultimately guided by the FDD.
Use this as your primary reference as it will contain a lot of key information about the franchisor. It will tell you about what payments you need to make, whether you’ll have exclusive territory and what happens when the agreement ends. You need to be well aware of the costs and circumstances before committing to anything.
Do an assessment – on yourself
One of the most important things to honestly assess, which is sometimes surprisingly overlooked, is to question whether you have the right personality to run a franchise in the first place. Understand that what you are buying into is an established system and wealth of accumulated knowledge. There is no point in paying for a franchise system if you merely want to do your own thing. Ask yourself whether you are comfortable following the rules of the business. If you have more of an entrepreneurial spirit and want to implement lots of your own systems, a franchise may not be for you.
Remember knowledge is power when it comes to choosing and running a successful franchise. Read up as much as possible and talk to as many people as you can, and you’ll be on your way to a rewarding business.
Tim West is the innovative Managing Director and Founder of 12 Round Fitness (12RND) which aims to provide the most convenient, results-driven product in the world. Each 12RND club is a purpose-built boxing and functional strength training facility, designed to deliver workouts created around the format of a 12-round boxing contest. They combine boxing skills and drills with functional strength and sports-based cardio exercises within a 45-minute circuit.
Tim has been at the helm of several successful fitness and technology ventures throughout the last 18 years.
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