Examine a franchise concept properly:
Introducing the Franchise EvaluatorTM

Learn about and use our Franchise Evaluation methodology to get a deeper understanding of franchise concepts. The Franchise Evaluator and its component 14 External and Internal factors, are covered in detail in our e-book ‘Franchising: Decoded and Demystified’. We highly recommend you download it and read it thoroughly. Below is a high level overview.
 

The Franchise EvaluatorTM:
Fourteen External and Internal Factors you should be exploring on every concept.

The Franchise Evaluator Score: As each factor is evaluated, it’s given a score from 1-10. Factor scores are totaled into an aggregate score, then measured against the scale.

The Seven External Factors

 

  1. Market Size – What population are you serving? Is your market broad, niche, or somewhere in-between?
  2. Industry Trend –Is the industry developing or mature?
  3. Product & Service Drivers –What drives the purchase of the product or service? Is it a “need-to-buy” or a “want-to-buy”?
  4. Real Estate Needs – What type of location, if any, is needed to deliver the product or service? If real estate is needed, are the requirements flexible or stringent?
  5. Competitive Climate – Are competitors a major factor in operating your business? If so, is competition sparse or saturated? Will it matter to your business?
  6. Regulatory Climate – Are the business’s products or services regulated, or do they require licensing? Will you or your employees require special licensing? If so, is the regulatory climate strict or lax? Will this affect recruiting employees?
  7. Brand Recognition – How well would potential customers recognize the brand? Is it unknown or well known? Is it emerging, fading or static? Does it matter?

Understanding each of these external factors will give you a rough, back-of-the- envelope way to know which factors are must-haves and which you can grant a little flexibility as you evaluate.

Also, if you identify external factors that do not work for you with respect to a particular category or brand, there is no reason to move forward to consider the internal factors. It is time to walk away.

The Seven Internal Factors of the Franchise Evaluator

 

  1. Operation Model – How does the franchise business operate? How does it make money? Are financial performance representations made?
  2. Franchisee Role – What role is the franchisee expected to play in operating the business?
  3. Franchising Experience – How experienced is the franchisor at being a franchisor?
  4. Leadership – What is the tenure, background, and commitment of the franchise’s leadership?
  5. Franchisee Engagement – How often and how well does the franchisor engage franchisees?
  6. Financial Health – In what kind of financial shape is the franchisor?
  7. Operational Systems – How developed are the systems on which you will rely to operate your business?

In much the same way external factors shape the business in which you operate, these internal factors have a material effect on how your business operates. You will notice an interdependence between external and internal factors, in much the same way there is an interdependence between franchisor and franchisee.

Both sets of factors are important, and both are required to paint as complete a picture as possible.

The Franchise Evaluator Scale

0 – 24Missing fundamental, internal or external factors

25 – 49More investigation is needed

50 – 74Worth exploring further with caution

75 – 99Add to consideration set

100 – 140Sound opportunity and likely a great fit

 

Where does information come from for the Franchise Evaluator?

In Franchising: Decoded and Demystified, we go into detail about information sources for each one of the factors and how to use them. All of our information comes from publicly available sources, with much of it coming from current Franchise Disclosure Documents.

There are also several powerful free tools and information sources to gather data as inputs for some of the factors.

Download Franchising: Decoded and Demystified and get to know the Franchise Evaluator thoroughly.

What Does A Growth Opportunity In Franchising Actually Look Like?

Illuminating the 12 Mysteries of Franchising and exploring concepts using The Franchise Evaluator are very useful tools for more complete understanding and deeper evaluation.

People still ask us ‘what does a growth opportunity in Franchising actually look like?’

We are now getting into the area of personal/professional observation, so take it with a grain of salt.

To us, a growth opportunity in Franchising has 5 macro attributes taken directly from the Franchise Evaluator.

 

  1. Operation Model – Size – Large; Demand – Necessary, not discretionary; Competitive climate – Few or no recognized brands
  2. Industry Growth Path – Identifying where the industry is on its growth path
    – Developing, not mature
  3. Franchise Operating Model – Low initial and ongoing operating costs; Manager-run business; Low inventory, low staff needs; Your role as a franchisee to manage your Manager, who in turn manages the systems and the operation
  4. Precise Operating Systems – Every aspect of operation systemized for manager-run businesses with consistent outcomes across multiple units – Simplicity is key
  5. Strong Franchise Leadership – A deep bench of proven franchise expertise and focus

Dive Deeper

This is just a brief overview. For a full explanation of the process, demystifying the 12 mysteries and for the Franchise Evaluator, Download Franchising: Decoded & Demystified.

Certainly let us know if you have any questions or have feedback for the CFT, our site and Franchising: Decoded & Demystified.

Contact us at [email protected]