William Penn said that “Patience and diligence remove mountains.” If you’re seriously considering franchising, you’re looking for the perfect franchisor to partner with. But that would not be enough because it is vital to check the characteristics of a franchise business that you are looking for.
Sifting through the ocean of information about your options can be a daunting process that requires patience and due diligence. The same goes in finding the right one out of 4,000 concepts can be challenging.
But the good thing is if you thoroughly research characteristics of a franchise could lead you to find the best opportunity and even lead you to choose a highly profitable one.
7 Major Characteristics of a Franchise
After you sign a franchise agreement, renouncing is no longer an option. You will not regret it in the future if you will do careful investigation in the first place. Your investment cannot be wasted in any sort so searching for the perfect one before signing in is very important.
1. Solid Concept
When choosing a franchise, the first question is-
“What do they do?.”
The answer to that question is the concept. This can be anything from the following examples:
The possibilities are endless. Once you know what the organization does, the next question is:
“Who does it serve?”
Your answers above might change to the following:
Beyond the market designation, a franchise might have a unique hook or angle that makes it one of a kind. The following are examples of the concepts:
In each case, there are defining characteristics of a franchise that help make a business unique.
As a consumer, we’re already aware of concepts. But as potential investors, we’re looking deeper at what makes a concept unique. We want to know how it’s implemented, and how it provides a satisfying experience to the customer.
What would make our franchise gym better than the other gym that’s half a mile away and that has been in business for decades? What does that gym offer its clients to maintain their loyalty?
As a potential investor, you should know what makes the franchise special. As you explore franchise opportunities, you may choose to…
1. Eliminate a whole number of candidates based on industry and concept.
Some people are not interested in working in the food industry. This takes several hundred franchise possibilities out of the running. Some don’t want to be responsible for a retail outlet and the investment that entails. This would eliminate many more franchise concepts.
2. It’s good to set clear parameters regarding what kind of businesses you don’t want to consider.
Just be careful not to dismiss too many possibilities out of hand. In my experience, many franchisee candidates choose the option that was originally their last choice.
The key at this beginning stage is to be able to identify a concept that benefits all the parties involved. In an ideal situation, the franchisor has a winning idea that grows and makes a profit.
The franchisee finds a way to leverage his or her business acumen to help further build the business and earn profits, and the customer receives good quality services or products.
If your concept is to win, then it’s time to move on to the next characteristic- the franchise’s business model.
2. Effective Franchise Business Model
Before assessing any franchise investment, ask yourself: “How does the franchisor provide its product in a way that it can replicate success in each new unit?” Or, “What is the franchise business model?”
When we refer to these systems, it is about how the franchising organization achieves its goals through daily business activities.
Franchisees should know how to:
These skills are essential. Gain more knowledge of individual franchise brands. You should be impressed at the efficiency and comprehensiveness of their systems.
Successful franchises have a rich system with simple processes. You should see consistency from one unit to the next in terms of marketing, responsiveness, product offerings, and professionalism.
At first glance, you won’t know the details of a franchisor’s systems. But you should understand its efficiency and capability while investigating the company.
Can you appreciate how the franchisor, franchisee, and customer are all succeeding? Do you feel you could trust this organization if you were a potential customer or franchisee?
The success of a franchise is rooted in the systems. The franchisor has in place to ensure quality and consistency from each franchisee.
3. A Good Franchise Training Program
The franchisor’s most important role is as a trainer. Each franchisor has a different approach to training. And, in some cases, the more you invest the more help you will receive. Many franchises have great training programs that deliver classroom and onsite instruction.
In line with this, Albert Einstein once said that “If I had only one hour to save the world, I would spend fifty-five minutes defining the problem, and only five minutes finding the solution.”
Franchisors have spent vast resources understanding their business. And they transfer this knowledge to you as a franchisee. Proper training is critical to the success of your business.
4. Established Brand Image
Brand equity is one of the greatest benefits of buying into an established franchise. In established franchises, customers already recognize and trust the brand and they are willing to pay a premium price for services. When one works out at Orange Theory Fitness, it doesn’t matter where the outlet is located, they trust that it will be a great experience.
As a franchisee in an established system, you don’t have to start from zero to prove that your brand sells quality products or services. As a potential investor, are you sold on the brand?
So as a potential franchisee, the franchisor expects you to protect the brand. McDonald’s won’t allow you to sell gyros on the menu. Some potential investors are discouraged by how little freedom they have to tweak the franchise system.
5. Franchises with Larger System Size
The benefits and risks of a small system
To be a part of a small franchise system, you get support from the corporate office but you may not have access to certain resources.
One of the major benefits of investing in a small franchise system is the potential for higher returns. Smaller franchises often require less capital and offer more flexibility, which could result in more profit. For example, a small franchise might be able to specialize in a certain product or service that larger franchises may not have the capacity to provide.
Additionally, wing to the lower overhead costs, your investment in a small franchise may generate higher returns than it might if you invested in a larger system.
The risks of a small system can include less capital and fewer resources. It also means that there’s less support from the franchisor, which could lead to more risk for franchisees.
The benefits and risks of a large system
Larger franchises have more established operations, with enhanced audit systems, updated technology, and economies of scale in purchasing goods or services. Some entrepreneurs may feel less autonomy over their businesses. And with a larger franchise system also means more competition.
However, the risk is lower than small systems or newer franchises because their system had already been tested long ago.
6. Clear Communication With Franchisees
Communication is vital between the franchisor and the franchisee. Check out the advantages in gaining good communication:
Remember, it is important that you feel at ease with the franchisor to build a lasting relationship. To do that, cultivate effective and clear communication at the beginning of your franchise career.
Lastly, look for systems that have a goal-oriented culture. The opportunity should also contain knowledgeable, approachable corporate staff and happy franchisees.
7. A Feel-Good Franchise
What is a feel-good franchise? – One of the franchise characteristics emphasizes “giving back” to people in many aspects of their operations.
In short, that has the heart towards their consumers and their employees.
Usually, they observe such follows:
If you would like to contribute to your community, look for a business showing this kind of dedication. A good corporate citizen is what they prioritize.
And you will realize during your franchise investigation that those socially responsible sometimes stand out.
If you think this fits you? Well, there are many you can see around.
All seven characteristics of a franchise business are worth considering in the investigation process. It will help you determine the right franchise you would like to invest in.
If you are ready to start your franchise journey, a well-qualified franchise consultant can help guide you through the entire franchising process.