Posted in Buying a franchise on June 17, 2011
If you’re at the start of your franchise journey and are trying to figure out which is the best business franchise, this article will help by giving you five simple steps to eliminate the poor performers and leave the best franchises from which you can pick your winner.
There are estimated to be over 3,000 different franchises operating in the United States at present. The number in other developed countries will be similar. With so many franchises on offer, how do you figure out which one is the best business franchise for you?
It’s often said that knowledge is power. And for you to have the power of choosing from the top franchises available, you will be rewarded by investing some of your time to research franchising in general and then narrow down your choices to a small number of high quality franchises.
So what sort of criteria would help you to pick the best business franchises? What’s a smart way of selecting from such a vast range? Here are 5 powerful steps to help you weed out the really poor performers and find the better franchises.
1 – First think about what you are interested in. Don’t waste your time looking at a fast food restaurant if you’re a health food fanatic and hate junk foods. Let’s face it, you’ll struggle to put your heart and mind behind a business that goes against your personal values. Chopping out the kinds of business that don’t interest you at all will certainly help you to narrow the field.
2 – Choose a strong brand name. In their terrific book, The 22 Immutable Laws of Branding, Al and Laura Ries make the point that the biggest brand in any market will ultimately control 50% of the sales. In the cola drinks world it’s Coca Cola, with Pepsi trailing in a strong second place. There’s only about 20% of the global cola drinks market left for all the other brands to squeeze in. So if you’re going to buy into a brand, make sure it’s likely to be the number 1 or number 2 brand, not an also-ran.
3 – Eliminate franchises less than 10 years old. In a research study, it was found that a large percentage of new franchisors businesses fail within their first ten years. If you’re looking for the best business franchise, make sure it’s been around for a long time first.
4 – Look for a track record of successful growth. McDonald’s is a mature franchise that’s been operating for over 40 years. They have around 30,000 restaurants and a history of steady growth through most of their life. The best franchise will either be a mature one, or a franchise that has passed its troublesome first 10 years and is growing steadily and successfully.
5 – High percentage of renewals. The franchise agreement you sign will have a limited life – normally around five years. If 75% or so of the franchisees renew after five years, you know that the franchise is giving them what they expected and you can be confident that they have picked the best business franchise for themselves. Some franchises have a dropout rate at this same level – would you want to spend your money with a company that loses three quarters of its franchisees every 5 years?
So there you have it – if you filter out the things that don’t interest you, choose a brand leader that’s been around for over a decade, has a track record of continuing growth and that the franchisees love so much that most of them sign up again and again after their franchise term expires, you know that you’ve found just about the best business franchise around.