How To Perform a Market Analysis for Franchise Exploration

Venturing into franchising can be exciting yet challenging. One of the pivotal first steps in this journey is conducting a thorough market analysis. This research not only lays the groundwork for your success but also helps you to navigate the complexities of your chosen industry and market. 

So what exactly is involved in performing a market analysis? 1851 Franchise spoke with Rolling Suds CEO Aaron Harper to capture his insights, and it basically breaks down into the following steps:

Define Your Target Audience

Understanding your target audience is the cornerstone of any successful business venture. Begin by delving into the demographics, interests and preferences of your potential customers. Utilize various methods such as surveys, focus groups and online tools to gather valuable insights and, most importantly, determine if there is a need for your product or service.

“I worked with marketing suppliers, and looked at the number of competitors, as well as potential leads, and the response time on those leads on average,” Harper said. “I determined there was a huge need for our service.”

Conduct Competitive Analysis

A crucial aspect of market research involves analyzing the competition. Identify both direct and indirect competitors, and assess their strengths and weaknesses. Gather information through online research, interactions with existing franchisees and customer feedback or online reviews. 

According to Harper, competition is a good thing, to some extent. If there is competition in your industry, that means there is a demand for it in a given market. If your concept doesn’t exist in any way, shape or form in a market, that might be a sign that nobody wants or needs it.

“See if there are other players or companies that do a similar service in the market, then you know there is a demand,” he said. “I’d rather steal market share from the local guys than go try to create a whole new industry.”

As for actually outperforming your competitors, Harper offered this insightful advice: “If there is demand, just go be better. Set a better mousetrap.”

Determine Market Demand

The demand for your products or services is another, albeit obvious, important aspect to consider. Investigate the overall market demand and evaluate if there's an opportunity for growth in your chosen market. 

Harper advised taking the ratio of commercial versus residential makeup of an area into consideration. Depending on your target audience, you may want more of one than the other or an even combination of both. Also, it’s important to keep in mind that each market is different, so be prepared to adapt your offerings accordingly. 

Analyze Market Dynamics

Understand the intricacies of your target market by analyzing various factors such as demographics, economic outlook and consumer behavior. Consider aspects like consumer traffic patterns, labor force availability and distribution models to determine whether a concept is a good fit within a given market.

Identify Target Markets

Research a variety of potential markets and assess their suitability for your franchise concept. Look for areas where there is a genuine need for your offerings and where your target demographic aligns with the market's demographics. Don’t just look for a good opportunity for the present moment; ensure that the chosen markets offer growth opportunities for your franchise.

Reassess and Adapt as Needed

Performing a comprehensive market analysis is essential for successful franchise exploration. By understanding your target audience, assessing market demand and navigating market dynamics effectively, you can make informed decisions that lay the foundation for a thriving franchise venture. Even after you’ve selected your franchise and have your business off the ground, be sure to continually reassess the market, as market analysis should be an ongoing process, and be prepared to adapt to changes to ensure your franchise continues to grow.  

To learn more about venturing into franchising, check out the follow stories:

• Why a Franchise Is a Great Long-Term Investment Strategy
• Start a Business or Buy a Franchise: Which Is Right for You?
• Hotel Franchising: The Ultimate Guide