How to Identify Growing Franchise Concepts

How to Identify Growing Franchise Concepts

With over 750,000 operating franchise concepts in North America, finding growing franchise concepts can be a challenge.

Growth with velocity means there are external and internal attributes of the concept impelling it forward and amplifying growth at the unit level – without your direct involvement. We call these attributes the ‘5 Mechanics of Scale’ and Franchisors whose concepts can grow with velocity have some combination of them.

1. Market Potential

The first thing you should consider when looking for growing franchise concepts is research the Franchise’s market potential. How competitive is the market? Is there demand? How profitable are similar businesses in the area?

These are all factors that franchisees should consider before locking in a franchise concept. Businesses are only as strong as their customer base. No matter how great your product or service is, if there isn’t demand or a market for your business, you won’t succeed.

When comparing franchises, here are a few market potential factors to look at:

  • Size – Large consumer pool
  • Product/service demand – Necessary, not discretionary
  • Competitive climate – Few or no recognized brands

2. Industry Growth Path

Growth is a very overlooked factor by people new to franchising. And it’s one of, if not the most important factor.

If your industry has reached it’s peak and is fading out, it’s probably not the best time to start a franchise.

For example, a newspaper delivery service business wouldn’t be a great idea to start today because most people get their news online.

You’ll have to work 10x harder to profit in a declining industry compared to a franchise industry that’s growing.

When evaluating growing franchise concepts, ask yourself

  • Where is the category or ‘industry’ now?
  • Is the industry still developing or is it mature?
  • What does the industry look like in 3, 5, 10, years from now?

3. Franchise Operating Model

Another factor to consider when evaluating growing franchise concepts is the franchise’s operating model. One of the greatest benefits of starting a franchise is the operating model. You aren’t alone when you start a franchise, you become a part of the business family.

So what franchises family do you want to become a part of?

Here are a few factors to look for when comparing franchise operating models.

  • Low initial and ongoing operating costs
  • Manager-run structure
  • Low inventory; low staff needs
  • Loose real estate needs
  • Your role as a franchisee to manage your Manager who in turn manages the systems and the operation.
  • You focus on overall business growth.
  • If available, minimum 6-figure EBITDA

4. Precise Operating Systems

Simple works. The more complex a franchise’s operating systems are, the more challenging it will be to scale.

Franchise that have creating precise operating systems allow for multi-unit growth.

Take the time to understand franchise’s operating systems. Once you have a general knowledge of operations, consider how easy it would be scale using those systems.

Is it clear cut or are the operating systems complex?

Simplicity is key.

5. Strong Franchise Leadership

One thing that all growing franchise concepts have in common is strong franchise leadership.

A deep bench of proven franchise experts at your back will make your job 10x easier. It helps to have strong leadership that you can reference when scaling, or handling other operational challenges.

When identifying growing franchise concepts, it’s important to peel back the curtain and look at the franchise structure, operations, and support system.

Choosing a franchise is a big decision, if you want help finding the perfect franchise for you, our franchise coaches have 20+ years of experience.

And we’ll evaluate your franchise for free.

Franchise Concept Evaluation