How Geography Plays a Role in Determining a Franchisee’s Potential Earnings

When it comes to finding the factors that determine whether or not a business is going to be successful, there’s one adage that rings true: location, location, location.

Where a business opens up its doors ultimately has the power to make or break a business, and franchising is no exception. That’s why geography needs to play an integral role in the investment and discovery process—it’s up to franchisees to determine how their future location will impact their potential earnings. And according to Scott Oaks, a former in-house franchise development professional with ten years of experience and current external consultant, the best way to start figuring that out is by working closely with their franchisor.

“Part of what candidates need to be asking franchisors right off the bat is what type of demographic information they have about the territory that they’re looking to open up in. Brands should be able to provide prospective franchisees with numbers beyond the general population—there are a lot of factors beyond that that have the potential to determine whether or not a local owner is going to be successful in a certain location,” Oaks said.

How geography impacts the overall success of a business depends on whether or not a prospective franchisee is interested in investing with a service-based model or systems that are location specific. If they’re looking to own a business that doesn’t require a specific brick and mortar location, Oaks recommends that candidates understand the people that make up the area they hope to serve. Franchisees behind health care concepts, for example, would want to know the average household income for a specific area to ensure that local consumers can afford their service in addition to how many seniors reside in their market. Being armed with that information beforehand will give candidates a better idea of whether or not their concept will take off in a specific market.

Having that information on hand is also helpful for service based brands that do require a brick and mortar center. Just take K9 Resorts Daycare & Luxury Hotel. The luxury dog boarding facility thoroughly vets every potential city before even agreeing to look into real estate there.

“We look at a market’s demographics in great detail before ever approving a site. Deciding on a location is one of the first things that we tackle with our prospective franchisees—we want to make sure that our local owners are going into an area that can support our business model in the long run,” said Jason Parker, co-founder and co-CEO of K9 Resorts.

Geography also plays a role in determining potential earnings for location based franchises. From restaurants to consumer facing stores, prospective franchisees need to ensure that their location is in an area where it will reach their target audience. Without direct access to those who will support the business in the long run, it’s impossible for franchisees to bring in a profit that will support them.

“It’s absolutely important for franchisors to play a role in helping a franchisee choose the best possible location for their new business. Investing in a franchise isn’t a minor investment—people are using a lot of money to make their dreams of business ownership a reality, so it’s only natural that they want the best odds of being successful. That’s why it’s essential for candidates to work with brands that actively take steps to ensure that they’re making the most of their investment,” Parker said. “There’s no doubt that geography plays a major role in determining the potential earnings for a future franchisee.”