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Thursday, January 5, 2017

Finding Franchise Opportunities That Fit

 by Seth Narayanan

 Recently I have read and written a lot about franchise business as the best way for aspiring business owners to own or start a business.  There are several well documented reasons for this, including proven business model, established operating procedures and the support system that comes with any franchise business just to name a few.  There are several other reasons that easily come to mind, but I am sure the overwhelming majority of business minded people have no arguments against the premise.

Now let us address the question I have proposed in the topic of the article.  Is there a 'best fitting' franchise business - franchise owner scenario?  And if there is such a scenario, how does one go about finding the best fitting franchise business opportunities for a prospective owner.

There are two approaches to answering this question, one from the Franchisor perspective and the other from the potential business owner perspective.  Firstly, the franchisor is typically interested in finding a business owner that has the financial capital and the resources required by the franchise businesses for sale.  Franchises vary a great deal in the amount of liquid capital required and net worth required to operate a business.  Franchisors are very aware of this and the first and perhaps the most important indicator of fitness is the capital required and capital available.  While the a novice prospective franchisee generally would push the limits of his capacity, the more experienced franchisor must exercise caution while selecting future franchise owner since they know a lot more about the capital demands of the franchises for sale.

The operational requirements of the franchise and the prospective owners experience is another important factor in evaluating the fitness.  Franchises have varying operating skill and experience requirements, with some requiring very close attention to detail from the operators, while others are amenable to a hands-off approach.  In some cases the domain experience can be crucial such as the food service industries.  The time demands on the owner operators can vary a lot as well.  So it is imperative that the fitness of the owner and franchise to each other is evaluated by both parties upfront in detail.

The geography and location of the franchise owner also plays a major role in the success of a franchise venture.  The location, while may be a totally unexplored geography for the franchise, may not fit the business model and the demographic client base of the franchise.  Also the proposed location must fit the potential franchisee, in terms of convenience to their home, availability of employees, cost structure and so on.  So the geography becomes a major fitness factor for the franchise selection.  There are several franchise opportunities available and a franchisee must exercise care while selecting the right franchise opportunity.

As you can see from the above, there are some very crucial fitness factors that must be evaluated between the franchise business and the potential franchisee.  Just the simple numbers of the franchise business or the qualifications of the franchisee in isolation do not paint the full picture.  The study of fitness of one to the other adds an important dimension to the selection process for both the franchisor and the would-be franchisee.

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