For some entrepreneurs, operating a franchise can be an ideal form of business.
The low-investment nature of the system, pre-existing market base, established distribution channels, strong brand and product awareness, as well as the collective bargaining power makes it extremely appealing.
However, how do we recognize a strong franchise opportunity that’s worth pursuing?
This post outlines some key indicators that can help you select organizations with a strong franchising model.
Common Indicators to Consider
The following indicators can provide entrepreneurs positive signals that the franchise opportunity can be profitable and sustainable.
1. Industry/market growth
Is the industry that you’re considering trending upwards with room to grow, or it is just a temporary fad?
Also, when researching and evaluating the growth potential of the franchise, determine if the opportunity fits your local area and demographic market.
For example, Vancouver is a city that focuses strongly a lifestyle of health & wellness, as well as sustainability. Green and eco-friendly franchises may be a more profitable opportunity than a fast food franchise.
2. Financials from Existing Franchises
Can the franchisor provide proven sales and profit records and other important financial information from current successful franchise locations?
When conducting due diligence, scrutinize the historical sales, profit-loss statements, associated operating costs and fees such as royalties, advertising and marketing expenses to evaluate financial strength and whether or not you can afford to operate the franchise profitably.
3. Low Competition
Franchises with less competitors in a particular geographic area can be an excellect franchise opportunity.
Be aware of essential services that may be lacking in underserved local neighborhoods or districts.
By establishing a presence in areas with fewer or no alternatives, you can potentially access an untapped consumer base and gain a first-movers advantage.
4. Support From Franchisor
Franchisors are expected to provide sufficient support and investment to individual units to bolster their operations.
These resources should include:
Employee recruitment and training
Marketing and advertising
IT and equipment maintenance
Choose organizations that have a reputation for being encouraging partners and have a proven track record of involvement with backing their franchises.
5. Concise and Clear Franchise Agreement
Franchise agreements can be notoriously complex and vague.
You want to ensure that the contract is simple to understand and clear in defining the terms of the partnership, the expectations of each party and the provisions for mitigating and maintaining conflicts.
It is highly recommended to have a business lawyer to review the franchise agreement with you so you have complete understanding of the document before making any further decisions.
Where to Find the Most Successful Franchises to Own
The following websites show current top franchise opportunities located in Canada.
You will find profiles on franchise’s background history, financial investment requirements, support and training, etc.
You will be able to request for more information about the franchise if you are interested in digging deeper.
Depending on the type of business you’re interested in, there is no shortage of franchise opportunities found across a wide range of industries.
Ensure that you conduct proper due diligence and evaluate important aspects of the entire franchise model such as industry growth potential, success of existing locations, robust financial history and a strong support system.
If you have any questions regarding franchising, please call us at (778) 565-4700, and one of our business lawyers will help guide you in the right direction.
The preceding content is for informational purposes only and does not constitute legal or professional advice. To obtain such advice, please contact our offices directly.