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A franchise that appears investment worthy to one potential investor may not to another and this fact is common knowledge to most anyone experienced or even new to franchising.  The reason for this is simple: people differ, opportunities suit certain individuals and not others, and each potential investor must make personal assessments when considering how and where to invest.

With this in mind, well positioned franchises in new or even established markets can offer an appealing package to potential franchise owners who are naturally suited for or experienced within the respective industry.  Despite the subjective nature of choosing a franchise system, superb positioning, whether related to literal location or the leverage of the brand, along with a record of lower investment costs coupled with an intellectual property safeguard that attracts attention in the given market are sure signs of an appealing package.  The details of how an arrangement such as this appears in any given industry or country are endless yet franchisees sniffing out an investment opportunity locally or abroad can consider these framework aspects and weigh them in relation to personal goals.

The less daunting the market, the better, and for US franchises moving into markets with similar cultural and language backgrounds, investment opportunities become even more plentiful and without the burden of adjusting the brand to markedly different cultural norms.  Industries that linger in the “recession proof” category are worth checking into, be they locally or globally placed, which means human services often top the list, especially in countries where cultures and social economics dictate the kinds of services that will be sought.  Both master franchising internationally and single unit franchising locally can succeed in these industries.

One excellent example of this is health care services related to in and out of home care for aging populations where families are culturally and economically impacted in such a way that seeking outside assistance is necessary.  Services provided by franchises in senior and family care industries that offer alternative approaches to care giving are positioned for growth, especially when their trademark image and company culture is easily recognized amidst competition.

Another example is business to business services provided by a franchise that enables legal and regulatory compliance with a twist.  Providing first aid and medical supplies to businesses that must be kept on site can seem simple enough, which it no doubt may be, yet when this need is fulfilled by a well positioned brand that can be relied upon throughout a market area for distribution, a rapport between client and franchise is established.  Easily recognized brands, which excel at keeping companies in compliance so as to avoid auditing disasters, offer an appealing investment package to investors.  The appeal is amplified if initial investment is relatively low with a history of earnings declarations, and existing franchisees consistently report contentment with their role in the franchise system.

Establishing the worth of a franchise when considering investment is one thing, and locating the right market to move into is another.  Yet these two concepts overlap considerably whether master franchising abroad is the aim or single unit at home.  Establish the franchises that have experienced and will experience the most growth based on human services, those services directly related to evident lifestyle trends, human care services, health, wellness, and regulatory measures of compliance in these areas.

The link between loyalty and technology is becoming stronger with each passing year as businesses update their approach to customer retention and marketing.  Some of the perks of technology?  Reaching your customers faster, covering a wider area, and mobile interaction.

Through the use of technology, customers can interact with local franchises at the time of their choosing, which may involve mobile interactions.  As such, making sure that all correspondence with customers through loyalty programs is relevant and of import must take priority to ensure that customers at no time feel the franchise is offering outdated or useless communication.  Respecting the interests and space of customers is important.

Whether in person interaction or via mobile phone (namely through the use of text messages), loyalty programs can feature customer choice to sign up in person or opt in through electronic media.  This can also involve email and franchises choosing loyalty programs are wise to research which avenue of contact will reach their customers in the most reasonable and relevant way.  This may vary based on the product or services offered and loyalty programs are in no way strictly limited to the food franchise industry that so often benefits from the use of loyalty systems.

Creativity may be in order to establish the right way to approach this important area of marketing and customers may even opt into polls to better establish their needs, their interests, and the limits that companies must operate within to retain interest over time.  Certain clients may prefer online social media, others not so much, depending on demographic information and even the region in which the franchise operates.  These matters must be carefully considered so as to aim marketing arrows with accuracy, to a specific customer through a specific outlet.

The overall aim is for franchises to locate the precise needs and interests of target customers, and delineate an ongoing way to offer services through an incentive-based structure that is appealing to a variety of lifestyle types, from those dialed and wired into social media, mobile interactions, and those who choose the simpler route via face to face interaction.  Each approach to customer loyalty has tremendous value for different reasons, which is what makes offering a variety of access points to incentives an even greater way to cover more ground with a diverse customer population.

One of the greatest concerns for many potential franchise partners, aside from financing a franchise investment project, can be how to choose a franchise that will endure economic shifts rather than capsize.  The thought of instability can weigh on the minds of new franchisees.  Consider how franchisees can locate franchise concepts that will last the test of time.

Established Franchising = Potentially Less Risk

By opting to invest with brands that are established and experienced with what it takes to make franchise concepts successful, and that have multiple locations over a large area either regionally or nationally, franchisees can limit some of the risks that may come along with a business that is new to franchising.  Franchising a concept is hard work and success often comes with time.  Diversity of franchisees and locations can be a good indication of a resilient business model and concept.

Many businesses new to franchising are still learning from trial and error.  Of course even established brands learn a great many things in the realm of business savvy even years after entering the franchise sector and even businesses new to franchising can offer a stable and successful investment opportunity.  Nevertheless, new potential franchisees can minimize risks when they enter investment arrangements with brands that have established themselves in the franchise world, or at the very least offer a portfolio that indicates promise based on other factors that indicate the business is capable of franchising success.  These factors may include the fact that the owners of the business have experience franchising under another company name, or perhaps have experienced successfully running the business in relevant ways in various markets, thus adding to the reliability of the brand’s success if it is run by a new franchisee in alternative markets.

Research & Investigate (Even More)

Know the brand you are interested in, including how things are operated beyond the obvious.  By speaking to existing franchisees, both those in your region and those outside of it for the sake of balancing your sources due to their potential biases, you can expand on the image of the franchisor a great deal.  Be in expectation and remain unsurprised should you find both happy and unhappy franchisees, who offer varying views on the franchisor.  The goal isn’t to locate a few unhappy franchisees and call off all bets.  The goal is to make a balanced decision based on the information available to you through the shared commentary and to then consider your own situation, reflecting on how likely it is that you’ll wind up camping in the satisfied or disgruntled lot with time.  This conclusion is a personal one and potential franchisees must decide for themselves.   Yet speaking with existing franchisees is only one aspect of research.

By acquiring a disclosure document (either Federal Trade Commission (FTC) or Uniform Franchise Offering Circular (UFOC) formats) for those franchises under review as prospective investment opportunities, potential franchisees can find out more about any former franchisees who may have walked away from their agreement with the franchisor.  By reaching out to these individuals to discuss the circumstances surrounding this decision, research covers not only the existing franchisees but those who have since severed their ties with the franchisor.  The disclosure document enables potential franchisees to get an even more detailed view of how the franchise operation has developed with time and specific events that may indicate warning signs or valuable shifts that serve to strengthen the franchise.

Understanding the costs of investing in a franchise business is vital for new franchisees, and in fact was one of the most important aspects for our users as reported on the Franchise Industry Survey of 2013 when considering which franchises to invest in, which highlights the value of due diligence resources in this area.

What are franchisors initially charging and what costs can new franchisees expect to pay?  How can franchisees view these costs in comparison to the business proceeds they will take home, thus helping them to decide which franchise investment is the most viable for their particular situation?

Consider the following areas when figuring initial investment costs:

- Products, Service Purchasing, which is often not considered by potential franchisees, may involve purchases that are part of the agreement package that are directly related to supporting the franchisor’s affiliate companies.  These purchases may involve equipment or support services related to the daily operation of the business, for example, and may be one time purchases or involved ongoing fees.  Such purchases or services may or may not be offered at competitive pricing rates based on typical market activity, which is why franchisees benefit from researching and posing any questions necessary to understand how such purchases may impact overall earning potential.

- Initial, Marketing, and Royalty Fees are the three most common fee categories of franchise agreements.  Initial Fees can range from around $10,000 and exceed $100,000, with a typical range being $20,000 - $40,000.  These fees are typically paid per unit at the start of a franchise agreement.

Marketing Fees and Royalty Fees, which can be set figure fees paid monthly or a percentage of income paid annually, from a fraction of 1% to 50% of revenue.  Such costs may be considered ongoing maintenance fees that regularly establish the relationship between the franchisor and franchisee, including any marketing support offered by the franchisor.

All franchisees must weigh whether or not these costs, when compared with the overall annual revenue for the franchisee and earning potential over time and throughout the duration of the agreement, are reasonable.  Franchisees looking for a franchise agreement that makes room for realistic business proceeds do well to research whether or not about 1/3 of profits prior to tax are shared with the franchisor, while 2/3 remain with the franchisee.  This is a general framework that many franchises stick to and franchisees can use it to calculate the costs of investing in a franchise business model.

What is the primary reason many prefer to go into business with a franchisor?  The appeal and advantages of additional support, security and assurance coming from an established business model.  Informed decisions stem from research.  Developing the ability to know the right franchise agreement comes out of this research, which begins long before the franchise agreement is signed.

So how can potential franchisees know what to look for if they want to enter into a sound franchising experience?  Self reliant research, interaction with existing franchisees, and knowing when to ask for guidance take center stage.

Talk to Franchisees

Great advice: get around and talk to as many of the existing franchisees who are already part of the franchise system.  Presume that each one has something valuable to offer, and don’t merely seek to find answers you want to hear.

Talking to as many existing franchisees as possible, at least 20 or more for example, can give potential franchisees the inside information that they need and from a kaleidoscope of individuals, which allows franchisees to piece together information and make valuable connections as to the integrity and collective impression of the franchise.

Some of the most valuable information stems from observing not only what existing franchisees have to say, but also what they choose not to say, their body language, and the overall feeling of whether or not they are pleased with their choice to invest in a specific franchise system.  This kind of “interview” process allows potential franchisees to perform even more detailed due diligence research.  Getting live opinions and faces in front of you is highly advantageous during the initial research stage.

Solicit Legal Support

Reaching out for the support of qualified legal professionals who are experienced with the franchise industry and investments is another excellent way to secure a wise decision.  By seeking the advice and oversight of an attorney to review the franchise agreement document, franchisees can learn more about potential risks associated with investing in any given franchise, which an attorney’s trained eye can weed out.

Additionally, the support of an attorney may assist potential franchisees with acquiring detailed clarification regarding areas of the agreement which are unclear.  This kind of support provides a solid source of guidance that new potential franchisees just entering the industry may find invaluable down the road should anything involving legal matters develop.

Know Your Start Up Costs

Relying solely on the franchisor’s assessment of start up costs may not cover the real story once a franchise location is up and running, especially when the varying costs of different geographic locations is not fully taken into consideration, such as the difference between running a franchise inland in markets with relatively low real estate costs versus an area in a larger city in costly coastal regions.

Potential franchisees who aim to fully understand start up costs include in their estimates a breakdown of costs based on inquiries with franchisees locally, and if expansion is desired, a breakdown of costs in different areas.  By compiling this information and calculating when the establishment will see profits, franchisees are acquiring self-sufficiency, reaching out for more information rather than simply relying solely on the franchisor for cost estimates.