Written by
Matt Frentheway

Evaluate a Franchise from These Two Perspectives

Franchising presents a golden opportunity for many aspiring business owners. Unlike starting from scratch, you buy into a proven system. But, not all franchises are created equal. Some offer a solid foundation for success, while others fall short. Therefore, learning to evaluate a franchise effectively is crucial. Today, I'll guide you through this process, ensuring you make an informed decision from both a consumer and an investor perspective.

Understanding the distinction between being a customer and an owner is vital. As a potential franchisee, you're not just investing in a product or service you like; you're considering a significant business venture. This requires examining the franchise from two angles: the consumer's view and the investor's lens. Let's dive into each perspective.

Evaluating a Franchise as a Consumer

Begin with an instinctual reaction. Ask yourself if the franchise's product or service is something you'd spend your money on. Consider its appeal, necessity, and pricing. Consult with someone from the franchise's target demographic for a second opinion.

Next, experience the franchise firsthand as a customer. Purchase their offerings, preferably at multiple locations, to assess consistency and quality. Reflect on these questions:

  • Did the experience match the marketing hype?
  • Was the staff professional and friendly?
  • Was the operation well-managed and organized?
  • Did your experience vary significantly between locations?

Negative responses here might signal underlying issues with customer satisfaction or operational consistency.

Evaluating a Franchise as an Investor

Shifting to an investor's mindset, your focus moves behind the scenes. Your primary concern is the franchise's business model and its sustainability. When scrutinizing a franchise as an investor, consider:

  • The franchisor's history and profitability
  • The experience and background of the leadership team
  • The financial health of the franchisor and its franchisees
  • Reasonableness of fees, startup costs, and profit margins
  • Franchisee turnover rates and territory sizing

Moreover, evaluate the franchise's alignment with your skills, leadership style, and goals. Ask yourself:

  • Does the business model make sense to me?
  • Is the average time to profitability acceptable given my financial and life goals?
  • Does the franchisor offer adequate support and training?

Remember, gaining access to detailed financial and operational data typically occurs during due diligence. A franchisor eager to take your money without proper vetting should raise red flags.

Final Thoughts

Choosing the right franchise is a multifaceted process that requires thorough investigation from both consumer and investor viewpoints. The best franchises excel in both areas, offering a compelling product or service and a robust, sustainable business model.

Feeling overwhelmed? I'm here to assist. Let's have a 15-minute call to discuss your options and how to navigate the evaluation process effectively. My expertise is at your disposal, and my guidance is always free.

Matt Frentheway

As a successful franchisee and entrepreneur, I can help you find the best opportunity to realize your dream of being a profitable franchise owner. Using my proven process as a franchise consultant, we’ll define your goals, narrow the field, and select the best franchisor for you to achieve financial freedom.