Factors to Consider When Scouting for A Franchise

Franchising basics explained


Franchising is a method of expanding business distribution channels for goods and services. It involves a franchisor and a franchisee.

You may consider franchising if you have created a business brand, have systems in place, and profit.  A franchisee pays the franchisor for operating under the franchisor’s name, brand, and goodwill. As the franchisor, you give the franchisee training, support, mentorship, rights to quality control, operating systems, and marketing strategy. It’s a manufacturer giving their rights to another business to run business in their capacities.

There are two types of franchising modules, but the most preferred one is business format franchising. Globally notable examples of franchises include; Taco Bell, KFC, and McDonald’s. You may not have these globally recognized brand names in your locality, but recession proof business can help you get close. Upcoming successful businesses are candidates for franchising. Before signing a contract with a proposed franchiser, take time and learn the tell-tales of the most appropriate company for you.

  • Credible proof of sales

One of the benefits of investing in a franchise is maximizing the franchisor’s success story in business.  Therefore, it is imperative to see and study the sales report of the franchisor to determine their worth and suitability for partnership.

You can hire a financial expert to help you interpret and translate the financial reports for you. The financial expert can project and predict future strategies that guarantee success in the franchisor’s business. The information reassures you that your franchising decision will bear fruits.

  • Growing market demand

Study the prevailing market trend and predict its future growth. You would want to invest in a product or service that has the potential to grow in leaps and bounds, not fading. For instance, the digital platform is a rapidly growing sector and seems to rule all economic aspects. It is a smart move to partner in a franchise in information technology and any  business that embraces growth in the area.

Capitalizing on current market trends, such construction, beauty, health, and wellness industries. On the other hand, avoid traditional business models that do not address emerging issues.

  • Repeat business

One of the most active businesses is any engagement that keeps customers coming to you. Repeat customers allow you to grow your business because the demand for your goods and services is continuous.

  • Upsell business opportunities

A franchise business that has multiple revenue streams is a good bet for your money. Scout for a business that has various products and services because the income streams are many and varied. For instance, a promising venture is a company that sells mobile phones, spare parts, accessories and software.

The business should have a culture of diversifying its products and services to reflect the changing trends in the market.  The trend means the management is careful to remain relevant and avoid becoming obsolete.

  • Incentives for new franchisees

The franchising business is at its best performance. Many performing enterprises seek opportunities to enhance their brand and make more profit. When scouting for a good franchisor, settle for one that offers incentives for new investors. What is the offer for new clients to keep them coming for your products? Invest in a business model that strives to grow your customer base for continuous business.

You can visit the first crop of the franchisee to find out their experience. If the company does not give you contacts for their former franchisees, consider that is a definite red flag. Do not be in a hurry to sign a contract with a franchisor who is stingy with information.

  • Examine their success story

How genuine is the success of the franchisor?  Research to find out who is doing well in the industry of your interest. Some franchises need refined talent, connections, and time to realize success.  A business that has run for a long has weathered many challenges to keep afloat. Experience in a particular field reassures investors that the franchisors will remain in business for a long time in the future. Examine their suitability before investing your finances in a façade.

  • Take professional advice

A franchising business requires a legal agreement. The franchisor’s agreement is a crucial document with details of rights and obligations between the two parties. Hire a professional lawyer and preferably one in the franchising sector.  A franchising attorney explains the legal clauses and ensures the document is fair for you.

On the other hand, remember to hire a finance expert to help you read, interpret data to help you make informed decisions.

  • Your interest and skills

Many people invest their money in the first franchising business that comes their way. However, before long, they lose interest in the industry and lose the investment. It is imperative to invest in your areas of interest. Does it fit your skillset?  Is it a business you dream owning?  Is it a business you dream of owning? Do you consider the franchising model ideal for you?

Your interest, talents, and skill should have a role to play in running the business. Listen to your gut feeling and go ahead if everything is in place.

  • Consider the timing

Is it the right time to invest in a franchise? While it may be challenging to predict the perfect time to seek a franchise, you can assess the prevailing circumstances. For instance, many businesses are now opening up for active operations, after months of lockdowns. Though one cannot make 100% sure predictions you can tell if the time is appropriate for you to invest in a franchise or not.

  • Your budget

How much have you set aside to invest in the franchise? Any business needs capital to start and run smoothly. After paying the initial amount for the franchise contract, you’ll need finances for operating costs before you start receiving your return on investment.

Do not forget that you also have a life to lead, and need money to cater to your needs. Sign a franchising contract when you know you can afford it and the cost is within your budget allocation.

Franchising is an excellent idea to expand your market. When scouting for your best fit, Do thorough research about the franchisor’s business success before appending your signature on the contract.

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