Buying a franchise is certainly a shortcut to starting a business without the headaches of a start-up company. There are far fewer blunders and glitches that often mark the early days of an independent business. As glorious as it may sound, the success of a franchise business is based on judgment. That is exactly why a thorough investigation of a franchise opportunity is necessary at the time of selection. Although there is no magic formula for the best evaluation of a franchise company in all sectors, there are some ways in which a more precise determination of the profitability of a startup can be made. Let’s find out how.
Explore the following 5 key franchisor areas to find definitive answers:
Unit growth
Start by looking at the unit growth chart. Are you doing well lately or has overall growth always been good? To find an accurate answer to that, find out how many units the company has opened in recent years. The journals that publish such information also include other important details that benefit decision-making. So, get a copy of a business franchise magazine and gather as much detail as possible. Focus on the growth rate over the past 10 years and the reports will indicate whether the opportunity is worth considering.
Unit sales
You want to see the average sales figures of the major franchises in Australia before choosing one. The sales figure per unit reflects the average turnover of the company. If the business is making big profits, a franchisee is likely to make their own by running a unit. However, you may find it difficult to know the average sales figure for each unit as companies do not disclose those types of details to the public. Again, a franchise magazine can shed some light on that.
New franchise success rates
How are the new franchises going? This is essential to estimate how your business will perform in the current scenario. So before you buy a franchise, make sure you have ballpark figures for the success rates of new franchises that have opened in the last 3 years.
Continuous support
The level of organizational support a company provides is a key factor in franchise operations. It is a much greater challenge to be part of a business that has its franchisees train their own employees and survive on their own. Top companies offer great support to their franchisee units in areas related to marketing, advertising, training, recruiting, acquisitions, litigation, and more. So make sure you are entitled to at least some of these when you sign up as a franchisee.
Franchisee Reviews
As you do so, stop to quickly go through the reviews posted by other franchisees about this particular franchisor. You want to hear from the horse’s mouth how happy or unhappy they are with the business.