Prospective franchisees will often first consider the financial reputation and success of a franchise system. Instead of asking franchisors if franchisees are making money, FranchiseKnowHow.com suggests that potential buyers ask: "Are franchisees meeting their financial expectations?" It's important to know if franchisees are seeing any sort of financial return. However, asking this question will tell business-minded individuals if a franchise is profitable or just getting by.
While a tried and tested marketing strategy is one of the many benefits to investing in a franchise opportunity, it should not be the only factor in driving growth. According to the Web site, purchasing demand should come in part from referrals as well. "Recently, there have been several examples of weak franchise programs that grew to a significant size by overly aggressive franchise marketing. In many cases the growth was so rapid there was no history to indicate favorable franchisee performance," writes the site.
It is no surprise that a successful franchise system is built upon the success of its franchise units. As a result, interested buyers should look for systems that began with unit franchises rather than just selling large territories or master franchises. A well-oiled franchise system will eschew relying on others to develop, train and support their franchisees in favor of launching a program itself to ensure unit owners have the knowledge and experience necessary for success.
While business-minded individuals may value their independence in making decisions, they should not seek a franchise system that practices a hands-off approach. Prospective franchisees should research a franchise's history to make sure that its leadership understands the business thoroughly, actively takes part in meetings and evaluating potential franchisees, is accessible to franchisees and has minimal litigation history, explains FranchiseKnowHow.
In the end, franchisees will want to review the business practices and mottoes of today's most successful systems. After a thorough examination, they will find that these generally share some of the same qualities: They are operationally simple, serve a customer demand and are well-organized.
Newsweek reminds franchisees to choose business opportunities and models they are familiar with and interested in. "You have to believe in what you're selling," Bill Marble, a franchisee for Five Guys Burgers and Fries, told the magazine.
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