The Test of Time
Is your prospective franchise built to last?
There isn't a single franchise brochure, Web site or advertisement that's going to say, "We're part of a new fad that may only last a few months." Every franchisor you meet will tell you their opportunity is based on solid market demand that will continue well into Y3K. Here's how to tell which ones are most likely to endure:
- Take a close look at the industry. What's the track record for franchisors and non-franchisors? What does the business press say about the future? What impact will technology have on consumer demand? Remember the days when automobiles needed a tune-up every 15,000 miles? Now that many cars need a tune-up every 100,000 miles, we bet the single-service tune-up franchisees are remembering the good old days.
- Look at how e-commerce on the Internet is changing how people make their buying decisions. Franchisors that used to offer education program for children exclusively from fixed locations are now seeing new competitors popping up that offer the same or similar service on the Web. Many of these companies are adapting by adding Internet-based programs.
- Look at the companies in the industry you're researching. Have they added new products and services or changed the way they deliver products and services to consumers to ensure that customers will continue to come into their franchisee's doors, or is their location design about as old and out of date as the products and services they sell? What have historic sales trends been? How are current sales? Are they increasing? Is the company taking advantage of the opportunities e-commerce may provide the system?
- Is the company focused on going international or are they focused on supporting existing domestic franchisees? The hype of international expansion often strips resources from smaller, less-developed franchisors, resources that used to be applied to their domestic operators. This is increasingly a problem.
- If the franchise requires a large pool of entry-level labor, will they be available-in your market-at a rate of pay that the franchise can afford? Even the best system, with the greatest demand, can't operate unless people are available to service its customers. Make certain you will be able to find employees in your market who are willing to work for you at the rate of pay you will be able to afford.
Excerpted from Franchising for Dummies (IDG Books Worldwide Inc.) by Dave Thomas and Michael Seid. For more information or to order the book, click here.