Investing In A Franchise - For Now Or The Future?

One of the main reasons that franchising is an attractive business model is because franchisees get to ride on the franchise’s established brand name and tap into a pool of ready customers. These customers, having already been goodwilled by the brand recognize it with a certain level of familiarized quality, will most likely patronize any business associated with the same brand.

So with all things being equal, investing in franchises seem to be a good option because they come with a following of customers. But all things are not equal.

Related: Don’t Forget About Marketing Support During Franchise Evaluation

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Bigger Franchises Vs Smaller/Younger Franchises

Bigger franchises, with their bigger marketing budgets, are able to pursue large scale and far-reaching advertising campaigns, thereby communicating to more consumers. Bigger franchises also come with a widely-recognized brand name and product offering, so chances are they also have a comparatively larger pool of customer following ready to make purchases. Clearly, a big name franchise will be better positioned to bring customers through their franchisees’ doors. But all these come at a price, and most likely a hefty one too.

On the other hand, smaller/younger franchises have much less brand recognition outside their operating location. Franchisees who are part of these systems will have their work cut out for them as they themselves will have to spend efforts into building brand awareness and consumer trust. And let’s not forget about customer generation and retention. In this case, counting on the franchise’s brand name to bring customers through the door isn’t going to work.

Smaller/Younger Franchises Aren’t Necessarily A Dud

For prospective franchisees with a limited budget, smaller and younger franchises might be the only way to go. But this doesn’t necessarily point towards a deal breaker, as long as an acurate understanding of the situation is achieved.

While a small/young franchise might not have a strong marketing or brand presence, what this means is there is still a lot of room for the brand and franchise to grow. If the potential looks exciting, coupled with a strong product offering, taking up a smaller/younger franchise at its starting phases means the opportunity to go in early while costs are still low.

Smaller/younger franchises might be where they are simply because they had a late start. Given time, who is to say they won’t grow to become the next superstar chain. And since investing is for the future, why shouldn’t the take for acquiring a franchise require the same view?

But It Takes Two Hands To Clap

However, the potential of a franchise is down to more than just brand awareness and product quality, because franchisor competence will also play a major part. When in discussions with the franchisor, get an understanding of how they will help you to grow and maintain your business - don’t just settle for general solutions, ask for specifics. If it seems that the franchisor is stumbling through an answer, it probably means they themselves haven’t yet figured it out, and most likely it is this reason they haven't grown to be bigger. Then you know you might have spotted a deal breaker.


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