đź•’ Estimated Reading Time: ~3 minutes
Starting a franchise is exciting! It’s also a little bit scary, given some of the risks involved if you haven’t done proper product market research.
Product market research is essential to understanding whether there’s a market ready to buy from the franchise you’re considering starting. It will ensure there are people on opening day eager to give you money for what you sell. As you’re searching for your first or next franchise opportunity, consider these factors when determining if you have product market fit.
Franchisor’s Territory Requirements
Before you start your due diligence of market research, it’s important to check with the franchisor to see if they have designated territories or territory requirements.
Often, franchisors will have done some preliminary research to know where they want franchisees to set up shop. Before engaging with a franchisor, it’s important to check out the “available locations” section on the franchisor’s listing on Franchise Direct so that you can be sure they’re looking for franchisees in your region.
Size and Demographics of Your Customer Base
Even if the franchisor you’re considering working with has availability in your location, go the extra mile to ensure your franchise will have the right customers in the geographic area around the location you’re considering. This requires rolling up your sleeves and doing some research.
Analyzing the customer landscape is time well spent. These are the people who will be there on opening day and who will share your new business with their friends to spur word-of-mouth marketing in your area. Without enough of the right buyers to buy, you’ll face an uphill battle from day one.
There are several ways you can gather this information on the demographics and possible customer pool in your area:
- Reach out to the local chamber of commerce
- Look at the US Census data
- Look it up on the Bureau of Labor Statistics Customer Expenditure surveys
Competitive Landscape
In addition to customer demographics, you’ll also want to analyze regional competitors. This will require you to do some searching online, as well as driving around the area to see where your competitors are located.
If you see several competitors in the area, don’t be discouraged. It’s encouraging to know there’s a market for what you offer. If you’re entering a crowded space, such as quick-serve restaurants, also known as QSR franchises, or fitness franchises, you’ll likely see numerous competitors. Take that as a sign that your offer is wanted and used in the area. At the same time, consider whether the franchise you want to start differs enough from what’s currently there.
Market Demands
Ultimately, you want to let the customers have their say about what comes into the area. You’ll want to gather qualitative data alongside the hard facts and figures about the customers in your area. Qualitative data doesn’t have a number attached to it. Instead, it comes from sentiment mining on social media forums, feedback surveys, one-on-one interviews, and more.
Conducting this type of research won’t just give you quantitative or numerical data about purchasing power and demographics. It’ll allow you to gauge interest in your franchise idea. This research reveals whether your area is ready for what you’re bringing to the region and if there will be enthusiasm to patronize your franchise on opening day.
Kimberly Crossland is the founder of Roadpreneur and Cruisin' + Campfires, two companies designed to keep families together and living in freedom through travel and entrepreneurship. The goal of both businesses is to inspire meaningful change through the power of a strategic, thoughtful approach to life and business. In her free time, you can find her looking for a new adventure together with her two boys.