10 Signs of a Great Franchise Opportunity

How do you know when you've found the right franchise for you? A good franchise opportunity has certain vital signs.

Signs of a great franchise opportunity

1. Industry growth

What is the growth potential of the industry you're considering? Some franchisors provide market research on their industry, but don't rely on this information alone. Do your own research. Equally important is growth potential in your local area. Frozen yogurt may be a hot franchise trend, but if your neighborhood is already saturated with yogurt shops, it's not a good opportunity for you.

2. Unit growth

Ongoing growth in the number of franchise units shows that a franchise is thriving. One key benefit of buying a franchise compared to starting your own business from scratch is the franchisor's name and brand recognition—and the more units that are open, the more brand awareness consumers have.

3. Strong support from the franchisor

What kind of training and assistance do you receive to get your franchise up and running—and keep it growing? Even a small franchise system can be a good opportunity, provided its franchisee support is strong.

4. Good management

Find out about the people behind the company and their experience in franchising. It's one thing to run a successful pizza restaurant, but another thing entirely to grow a pizza franchise. How long has the company been franchising? Meet the management team and the franchisee support staff to get a feel for what it will be like working with them day to day.

5. Marketing and advertising support

What type of marketing and advertising programs does the franchisor have in place? Is the company taking advantage of the latest trends that competitors in the industry are using, such as online marketing or social media? You will likely be paying a monthly advertising royalty, so make sure you're getting your money's worth.

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6. Satisfied franchisees

Meet and talk with both current and former franchisees to get their honest opinions of the franchise system. If all the franchisees are suing the company, that's obviously not a good sign. But if the franchisees you talk to love what they're doing and would do it all over again, that's a plus.

7. Adequate earnings

Can you make a living from the franchise? To find out, you'll need to estimate potential earnings. Some franchisors provide average earnings information in the Franchise Disclosure Document (FDD). For others, you'll need to come up with your own estimate by talking to franchisees.

8. Sound financial statements

Three years' worth of financial statements are contained in the FDD; have your accountant go over them in detail. Does the franchisor practice sound financial management? Does it have the financial resources necessary to thrive in today's economy?

9. Honesty

When you have questions about the franchise opportunity, do you get a fast response and straight answers from the franchisor, or do you get the runaround? The way the franchisor treats you now is a good indicator of how you will be treated when you are a franchisee.

10. A good fit

Even if a franchise meets all the above criteria, there's still one more to consider: the franchise must be a fit with your personality, passion, and skills. Making a franchise succeed requires long hours and hard work. You need to enjoy what you're doing in order for your franchise to thrive.