Franchise Sleuthing 101: Uncovering the Secrets of Your Dream Business

Are you on the hunt for a new business opportunity? Whether you’re a budding entrepreneur with high ambitions or an industry veteran looking for another investment to add to your portfolio, franchising offers an enticing path toward your next big venture.

The U.S. franchising space is massive and is only getting bigger. Statista reported that, in 2022, there were more than 792K franchise establishments in the country, with an economic output of roughly $827 billion. With their established brand identities, proven business models and support, franchising has become an attractive avenue for entrepreneurs to chase their entrepreneurial goals.

However, the franchise space can be complex and overwhelming to those entering it for the first time. So, what exactly do you need to know before you can become a franchise owner?

Behind the Scenes of Successful Franchises

Before you enter the world of franchising, you should understand what makes up a successful franchise. While all thriving franchises have varying underlying components, the majority of them all feature these core elements:

• Proven Business Model

At the heart of every established franchise lies a meticulously crafted business model. This model serves as a tried-and-true roadmap for franchisees and outlines the overall steps to profitability.

• Standardized Processes and Procedures

Successful franchises prioritize consistency through standardized processes and procedures. Consider McDonald’s as an example. McDonald’s has become the world’s largest franchise network with more than 38K locations. The franchise has managed to scale as much as it has for a number of reasons, but one of the key factors to its success has been its commitment to standardized processes and procedures. Regardless of which restaurant location you visit, you should have the same experience. This consistency not only builds trust with customers but also ensures efficient operations. As a result, this can ultimately make or break a franchise.

• Differentiation and Market Demand

Brands that have staying power are usually able to set themselves apart from the competition. They identify and capitalize on specific selling points, whether through innovative products or services, exceptional customer service or distinctive marketing strategies. For example, Pedal Pub is a party bike franchise concept that allows a group of people to enjoy food and drinks on a large pedal-powered bicycle. The brand, which came to the U.S. in 2007, has become the leading brand of its kind as a result of its offering, which continues to draw in new customers. Successful brands need to position themselves to create or meet that existing market demand in order to stay relevant and ensure longevity.  

Effectively Researching a Franchise

When it comes time to actually pursue a franchise opportunity, there’s no phase more crucial than the research stage. Not only will conducting your due diligence empower you with the knowledge needed to make a well-informed decision, but it will also reveal your own compatibility with the brand. Remember, as a franchisee, you’ll be working closely with this brand for years to come. If you’re not genuinely passionate about the business, the journey can quickly become an uphill battle.

There are a few ways you can go about learning about a brand. These include:

• Online Research

Online research is the most immediate way you can learn about a brand. You can scour everything from franchise websites, forums, YouTube videos and reviews to gather insights from both past and present franchisees alike. Many franchisors will have websites or YouTube videos that showcase franchisee testimonials so you can get a feel for what the brand’s culture is like. We recommend paying attention to reviews and ratings, as these can provide valuable perspectives about what the franchise is like behind the scenes.

• Meet the Team

Another option to get to know the brand is by meeting with the corporate team or attending a Discovery Day. In short, a Discovery Day allows prospective franchisees to get a firsthand look into a brand. These are typically held at a brand’s corporate headquarters and allow individuals to learn about the brand from the leadership team, as well as current franchise owners.

• Franchise Disclosure Document (FDD)

Lastly, one of the best ways to get a look at a franchise is by reading through its Franchise Disclosure Document. These documents, which can typically include 200 pages or more, will showcase in-depth data about the company, its franchising process, what it expects of franchisees and what franchisees stand to gain. You can learn more about what’s included in an FDD here.

How to Evaluate Potential Franchises

Now that you understand what makes up a successful franchise and how to go about researching them, you’ll also need to know how to evaluate a potential opportunity to determine whether or not it’s the right fit for you.

• Self-Assessment

Start by assessing how well the franchise aligns with your values, long-term goals and personal interests. Many entrepreneurs who have gone down the franchising route suggest investing in a business that you’re truly passionate about, as your enthusiasm will help guide your success. As a reminder, although franchises typically have proven models for success, they will still require you to put in an investment of time, money and hard work.

“Succeeding in any kind of business requires resiliency,” wrote Michael Barnett, the co-founder and CEO of Romp n’ Roll. “As a franchise owner, you will encounter inevitable challenges. We have found that entrepreneurs with passion for their business have the ability to overcome these difficulties and push forward.”

• Budget and Investment

The next step you should take to evaluate a potential franchise is to analyze your budget, the initial investments, ongoing fees and operational costs. These costs will all be listed in the FDD. Make sure the franchise opportunity is financially viable for you. Although you can start a franchise with limited funds, it’s not recommended, as this could potentially stifle your ability to scale your business.

“You need to understand the cost structure, how long it takes to get your business up and running, and monthly costs,” said Praful Mittal, the CEO of WIN Home Inspection. “Don’t start a business if you can’t fend for yourself.”

• Market Analysis

Another helpful tool to evaluate a franchise and your potential success as a franchisee is to conduct an analysis of the market and industry in which the brand operates. You should research the brand’s competition, market trends, and demand for the products or services in your region. Having this information in your back pocket is vital for gauging your potential growth and success.

Ready, Set, Go!

Franchising can be both challenging and rewarding. But with this information, you can be well on your way to joining a long line of entrepreneurs who found their dreams realized through franchising.