FRANCHISING FEATURE ARTICLES
Assessing your dream franchise
Every prospective franchisee wants to get onto the next best thing. But how do you evaluate which franchise opportunity is right for you? John DiNatale , Senior Consultant at DC Strategy helps point out the signposts that will direct you to your destination.
AS A PROSPECTIVE franchisee, you’re faced with a daunting task. What type of business should you get into and how do you assess the risks, benefits, opportunities and potential for any particular opportunity promoted by a franchisor? With franchise opportunities virtually everywhere, it pays to set some criteria for your evaluation early in the process.
To a large extent, the choice of a product or service that is “on trend” and playing into a growing market will typically derive greater longer term value in both profit and goodwill than those segments that are maturing, in decline, or will attract substantial competition because of relatively low barriers of entry.
Before you rush to pick up the phone and call the many franchise opportunities contained in this magazine, perhaps it is appropriate to think a little bit about where a product or service offering might fit within the marketplace and, importantly, where it might be in the next three to five years when you might wish to exit the venture.
The reality is that some excellent owner-operators are working in extremely tough and competitive environments and not reaping the rewards, while other franchise owners who are contributing perhaps less time and effort but by a shrewd choice – or just plain dumb luck – have chosen a segment which is outperforming the rest of the market.
To organise the process of selecting the franchise that’s right for you it is worthwhile addressing the following key issues early in the selection process.
Sector
This is potentially the most important decision you will make. In reading the newspapers and talking to your friends, relatives and business colleagues, what are the trends that you see emerging that have the potential to grow significantly over the next ten years? All sectors start by emerging, progressing toward maturity and then into decline, and there are substantial financial opportunities at every stage of this cycle.A great example of this is the “Pick‘n’Pay” confectionery business in which consumers were confronted with 50 different confectionery items in acrylic containers and a small spade to shovel their choice into a bag. During the ‘90s there was one of these stores in almost every major shopping centre in Australia, and yet within a few years they have virtually disappeared entirely from the marketplace.
Sectors that have enjoyed longer-term positive trends are healthcare, aged care, child development and children’s products and services, food, hair and beauty, leisure, fitness and well-being.
Assessing the opportunities
Having decided on the sector and the product or service, the question is how to discriminate between the available opportunities. The following points may prove useful in finding the opportunity with the best scope for growth and profits.
Brand: Brand is probably the single most important part of any franchise network and is critical for you to consider. Not every great brand will start off being well known. Excellent examples of emerging brands in the food sector are Grill’d and Healthy Habits. These businesses have invested considerably in their brand strategy as a precursor to franchising. The obvious stellar brand that has emerged in the last few years is Boost Juice, which is an excellent example of how a brand strategy has significantly enhanced the growth of this group on both a national and international scale.
At the other end of the spectrum are businesses that have been in the market for many years and are offering franchises or licences of a dominant brand that is a magnet for consumers. These include Australia Post, Telstra, Caltex and ANZ. Big brands are easy to spot and offer a relatively safe decision on the branding front. Smaller emerging brands offer substantial upside potential but a judgement needs to be made. Do they have their branding and brand strategy well executed and will they maintain it in the future? A conversation with the franchisor about their brand strategy and the evolution of the brand is a worthwhile discussion to have.
