So you’re thinking of buying a franchise, but should you go with old and established or new and trendy? Trendy can be enticing. They’re the types of franchises that are cutting edge, headline grabbing and the hot commodities of today. Think green, pets and frozen yogurt. But whether they’ll be around tomorrow remains to be seen. So what do you stand to gain or lose if you go trendy? Here are some pros and cons and general tips to keep in mind:
1. You’ll be tapping in to a larger movement. A trendy franchise already has a lot of buzz and momentum, saving you from having to create the hype yourself.
2. You, too, might find yourself getting caught up in the hype. To avoid this, go in with reasonable expectations, not just to make a quick buck. “Just because something is trendy does not mean that it is profitable,” says Mark Leonard, a former franchisee whose site, Your Franchise Mentor, assists prospective franchisees with their franchise investment decisions.
3. Getting in on the trend early on might position you as a key player and allow you to stay on top of the wave. For a while, paint-your-own-pottery concepts were popping up all over. But it is a franchise, Color Me Mine, which has emerged as the main survivor in this once-trendy industry.
4. You’ll be dealing with younger, newer franchisors, so the systems might not all be in place yet. “No matter how “hot” the concept appears, I would warn any prospective franchisee against investing in a franchise that doesn’t have a well-proven system that has many profitable franchise locations,” advises Mark Leonard.
5. Are you a risk taker by nature? If so, a trendy franchise that is not as time-tested or established as older ones might fit your character perfectly.
6. A trendy franchise based on a technology or gadget risks becoming obsolete fast. Therefore, before signing that 10-year franchise agreement, take the time to examine what benchmarks the franchisor has put in place to ensure a seamless transition to the next technological breakthrough. At one time, franchises specializing in audiobooks were the latest thing, but, now, it’s hard to even find evidence that they ever even existed.
7. Trendy concepts are likely to attract lots of competitors.Make sure that the franchisor is prepared to deal with such competition and innovative enough to stay ahead of the pack. Bill Chinn, a multi-unit developer currently opening six Red Mango locations in Texas, was attracted to the frozen yogurt franchise because he felt it was “at the intersection of three major emerging trends: health trend, organic trend, and home-made replacement meal trend.” But what attracted him most to Red Mango was its management team, a team which he felt was qualified to win the “brand war.” “By definition, if you are investing in a trendy product, you are entering into a high-risk, high-reward environment, so you do not need any other factors increasing your risk profile, like taking chances with an inexperienced management team,” says Chinn.