So you’re considering buying a franchise. Maybe you’ve even narrowed it down to the specific brand you want to operate. But before you sign that franchise agreement, do a little research in your city or neighborhood where you plan to open it to make sure it’s a wise financial decision.
Here are the questions you should address to determine the viability of this particular franchise in your town.
What Franchises or Independent Businesses in this Category Already Exist?
If you’re thinking about opening a coffee franchise, for example, you’d want to know where all the Starbucks are. But while Starbucks might be your biggest competitor, look also at other franchises as well as independent coffee houses.
You can in no way assume that, even if a coffee brand is well-known and successful nationwide, it will survive or thrive if competition is fierce.
Where is There a Need for This Type of Business?
You might want to open a coffee shop around the corner from your house for convenience, but that might not be where the opportunity is greatest. Spend time driving around neighborhoods to find where there’s a need you can fill with your franchise.
It might be in an up-and-coming neighborhood where a new condo is being built that you’d have the most opportunity for success, or even an older and run-down neighborhood that is starting to be gentrified.
Taking a risk in an area that isn’t yet established as a commercial go-to area may help you find affordable commercial rent prices and, over time, could be far more profitable for you.
How are Other Franchisees Faring?
If you live in a large city, there may already be franchise locations for this brand in operation. Typically, franchisees are willing to talk to you about the business if you’re looking to buy into the brand. Because locations are spread out across the city, you wouldn’t really be competing with other franchisees.
Ask them how business is in their area, and if they’d do it again. You might find out something interesting, like the fact that they struggle to compete against a lower-priced franchise that also has locations citywide. This knowledge can help you make the decision about whether this particular franchise is a good idea for you to invest in.
What Are My Alternatives?
If the signs are pointing toward this not being a potentially lucrative franchise for your area, you have two options.
The first is to look into other areas beyond your city. Maybe you open a franchise in a small town 20 minutes away that doesn’t yet have a coffee franchise. Yes, you would have a short commute, but it might end up being a better investment in the long-term.
Otherwise, you can look at other franchises, either in the same genre or a different one completely. Just take your time all over again with the process to assess whether it’s a good idea or not.
Susan Guillory is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.