Some Franchisors Neglect the Importance of Market Research

There are two primary objectives franchisors seek to achieve!  First, the recruitment of qualified franchise candidates and second, growing their franchise network with successful franchisees.  However, a number of franchisors neglect another important objective that’s related to the two. This requires having an effective franchise recruitment and development strategy that targets the right markets.

The start of a franchise development program usually begins by granting franchises in proximity to the franchisors corporate office. Although this development strategy is a good beginning it doesn’t end there.  Here are some reasons to begin with this approach:

• Franchisor support services are close by
• Having franchise development in a concentrated market or region can increase and enhance franchise brand recognition
• Franchisor staff can more closely monitor franchisee operations and performance. This can also enable the franchisor to be more knowledgeable about franchise operations

However, some franchisors totally ignore this strategy and instead take a reactive approach, whereby they receive a franchise application and the franchisor is reluctant to deny a qualified candidate a franchise despite being 2,000 miles away. I would venture to state that this is a rather common occurrence in franchising.  However, the correct approach is for a franchisor to identify those markets that offer the best opportunity for success. This approach requires in some cases surveying potential customers or doing an exhaustive competitive survey or both.  Another approach is to review the performance of franchisees that provide products or services comparable to your franchise.

How to identify the best markets:

1. Look for similar franchisees in particular states or markets. Those markets with a concentration of similar franchises are an indicator of possibilities for success.
2. Keep in mind that a lack of competitive franchises in a market could indicate weak demand, rather than a good opportunity.
3. How many competing brands are in a market? Are there one or two dominant brands or several small brands. Determine how your franchise would match are to the existing franchise brands.
4. How much the franchise systems have grown in the past several years is another indicator of market strength or weakness?
5. What has been the franchisee turnover in specific markets and among which particular systems?

Once the most receptive and low risk markets are identified a franchisor can proceed with implementing its franchise recruitment strategy using a more targeted approach, rather than a shotgun approach for attracting franchise leads. The Franchise Brand Density Scale™ provides an analysis of a specific market that indicates the potential opportunity or lack thereof for developing a franchise category.