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Perhaps you are considering leaving your corporate career to go into business for yourself, or starting a venture part-time while you transition out of that career or are contemplating a move to the U.S. to invest via the E2 visa program or have graduated college and don’t want to work in the corporate world.  All are valid reasons to reflect upon franchise ownership.

 Let’s talk basics. A franchise location is a type of business that is operated or managed by an individual(s) known as a franchisee using the trademark, branding and business model of a franchisor. In this business model, there is a legal and commercial relationship between the owner of the brand (franchisor) and the individual (franchisee).

 In essence, a franchisee pays a franchisor an initial fee and ongoing royalties.  The franchisee, in return, gains the use of a trademark, the franchisor’s ongoing support, as well as the right to use the franchisor’s business system and sell its products or services.

The business model for each franchise concept is different and you will need to evaluate it as part of your due diligence.  What exactly does it encompass?  Many components…

𝗩𝗮𝗹𝘂𝗲 𝗣𝗿𝗼𝗽𝗼𝘀𝗶𝘁𝗶𝗼𝗻

From a customer’s perspective, they not only want to know how a product or service is different from the one they may already be using but also what value it has for them.  Is it able to improve upon or replace the current product or service and are they receiving the best possible deal?  From the potential franchisee’s perspective, the value proposition differentiates the brand from competitors.

𝗠𝗮𝗿𝗸𝗲𝘁 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆 𝗮𝗻𝗱 𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲

When considering any business, you need to define customer segments that share common characteristics that meet your demand. These characteristics can be “hard” variables such as age, gender, location of residence, level of education, occupation and revenue level, or “soft” variables such as lifestyle, attitude, values, and motivations for buying.

Hard variables can help estimate the number of potential customers a business can have. For example, for an after-school STEM/STEAM program, you should know how many school age children reside in the territory and birth rate estimates for upcoming years.  Soft variables can help identify motivations that lead to purchasing decisions including price, prestige, convenience, durability and design.  For the same after-school STEM/STEAM program parents want to help their children to perform better academically and improve scores to be better able to attract college scholarship money or attend the desired university.

𝗠𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 

In order to offer a product or service successfully in the market and meet audience demand, evaluate the 3 Cs and 4 Ps:

𝘾𝙪𝙨𝙩𝙤𝙢𝙚𝙧: Your audience or target.  If you don’t enjoy working with seniors, no matter how attractive the large market appears, an in-home senior care business isn’t really for you.

𝘾𝙤𝙢𝙥𝙚𝙩𝙞𝙩𝙞𝙤𝙣: Who are the direct and indirect competitors?  Do they or will they threaten the business?

𝘾𝙤𝙢𝙥𝙖𝙣𝙮: Determine the franchisor goals, strengths and weaknesses.  Does the franchise continually strive for improvement and optimization?  Look for internal (franchisee validation) and external (Franchisee Satisfaction awards) analysis.

𝙋𝙧𝙤𝙙𝙪𝙘𝙩: Design-Appearance? Quality? Packaging?

𝙋𝙧𝙞𝙘𝙚: Knowing supply, demand, competitive product, other fees, pricing terms. What price will the market bear?

𝙋𝙧𝙤𝙢𝙤𝙩𝙞𝙤𝙣: Advertising, public relations and promotional strategy?

𝙋𝙡𝙖𝙘𝙚: How and where is it distributed? Is that convenient for the customer?

𝗖𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲 𝗘𝗻𝘃𝗶𝗿𝗼𝗻𝗺𝗲𝗻𝘁

In 1979, a Harvard economist specializing in industrial organization, Michael Porter, wrote a Harvard Business Review article entitled “How Competitive Forces Shape Strategy.” Today it is still considered one of the best sources on the subject of economic market competition.