How to Evaluate Franchise Opportunities

If you’re considering buying a franchise, you may be getting a lot of advice on what you should look for in a brand. This is certainly necessary, as your selection of franchise opportunity has a major impact on your ability to achieve success.

But, choosing the right one isn’t just about seeking out a franchise that meets your list of requirements. You must also be able to identify red flags that could hinder your success.

Watch out for the following warning signs of a potentially bad franchise ownership opportunity.

More Locations Fail Than Succeed

One of the first metrics you should look into in order to gauge a franchise’s viability is its success rate. How many locations are running smoothly and effectively? How many have closed down?

There are many reasons for a franchise to fail, including everything from a bad location to poor management. What you need to watch out for are opportunities that failed due to the brand’s business model. If more than half of locations go under, that’s a red flag.

To get a clear and adequate picture of why some franchise buyers succeed and others fail, do your research. Talk to the brand’s successful franchise owners about what it takes to make things work with this corporate partner. Ask about some of the challenges they’ve faced that could have cost them the franchise location.

Then, dig a little deeper and search for owners that had to close their doors. You’ll want to get an accurate picture of why they had to do so and whether it was due to external factors or a flaw in the corporate partner’s business model.

There’s Little Or No Training Involved

You never want to go into franchise ownership without an adequate amount of training. Before opening your doors, you should know how to run the business and be intimately knowledgeable about the products you’re selling.

Choosing the right franchise means opting for one that facilitates training. Your corporate partner should have multiple forms of guidance in place for new owners, including things like:

  • Formal training based on a curriculum
  • Flexible, online learning options
  • Opportunities to receive hands-on experience in other franchise locations
  • Sales assistance
  • Management training

Ask your prospective corporate partner about the training options they offer. If you’re not comfortable with the level of training, walk away. You want to find franchisors who are invested enough in their owners’ success to provide the necessary knowledge and tools.

Corporate Support Is Lacking Or Insufficient

Support from a corporate partner could make or break a franchise location. And, that support shouldn’t end once you’ve completed your initial training. Look for a corporate partner that provides ongoing support long after the franchise buyer has invested.

What does this support look like? It typically comprises:

  • Location selection aid
  • Initial and continuous training
  • Corporate mentorship
  • Marketing materials
  • Conference attendance opportunities
  • Accounting and financial guidance

The best way to gauge potential support from a prospective corporate partner is to talk to current franchise owners. They experience this support (or lack thereof) every day.

You’re Not Sold On The Product Or The Industry

This one is simple: If you don’t believe in the product, your customers won’t either. Look for opportunities based on products or services that you’ve personally used and would be happy to recommend.

Your offerings are the crux of your franchise location, so you need to feel good about making a business out of them. Talk to your friends and family, and use your own experience as a consumer to find an offering that would sell well in your area.

Conduct extensive research to determine if the industry you’re investing in is worth the money. Are franchise buyers turning a profit in that field? Read industry publications and talk to other owners before making the big decision to buy