Why Researching the Competition is Crucial for Candidates in the Process of Selecting a Franchise

There’s a lot of work that goes into selecting the right franchise. Even after determining that franchising is the right model for you as an aspiring business owner, there are a lot of factors to take into consideration before deciding on a specific brand to invest in. And it’s those additional insights that will have the potential to make or break your brand down the line.

After the due diligence process has begun and you have a few brands in mind that you’re interested in, it’s essential for candidates to determine whether or not they’ll truly be able to thrive and grow alongside a brand. To do that, there are a few key data points that prospective franchisees should look out for when doing their homework.

“One of the first things that candidates should look for when selecting a franchise is whether or not they’re a cultural fit for the brand. The next thing that they should take into consideration is whatever is disclosed in a brand’s FDD as it relates to dollars and cents,” said Stephen Polanski, senior vice president at Buxton. “When prospective franchisees determine if a brand is a good fit for them both personally and financially from the get-go, they’ll have a better understanding of what exactly it is that they’re looking for.”

But limiting your research to the brands that you’re interested in isn’t enough to make a fully informed decision when selecting a franchise. It’s also critical for aspiring candidates to thoroughly vet the competition.

“The reality of selecting a franchise is that the more a candidate knows, the better. There isn’t one specific statistic that will help prospective franchisees understand their competition over another—they really need to take a look at the overall marketplace both in their industry and in their geographical area. That includes knowing where their potential customers live, work and play,” said Polanski. “If candidates match up consumer demand with the competitive presence, they’ll have a better idea of what their business will look like before they ever open up their doors.”  

By researching their potential competition—both within their industry and within their geographical area—aspiring franchisees are automatically giving themselves a leg up when it comes to launching a business. And even though it may seem daunting, completing that necessary research isn’t as difficult as it may sound. The best place to start is also the simplest: Google.

“The nice thing about today’s digital-centric world is that you can do a lot of research in a very short period of time. Whether you need to dig deep into a specific industry, segment or brand, there’s a lot of information available right at your fingertips by running a simple Google search,” said Rick Robinson, founder and president of Services4Franchising.

But search engines aren’t the only place that people can turn to when selecting the franchise concept that’s best for them. In addition to industry resources like the International Franchise Association and local Chambers of Commerce, cities and states offer entrepreneurs their own set of tools to ensure that they’re making the most informed and well-rounded decision possible.

“Of course, the best way to look into the competition is to do a little digging online and do some of your own research. But there are a few resources out there that can make that process easier for prospective franchisees that are often overlooked,” said Lonnie Helgerson, president of Helgerson Franchise Group. “One of those is the regulatory franchise listing offered by some states. If you’re thinking about becoming a franchisee in a state that offers a comprehensive directory of all the brands operating in your area, that’s a great place to find information on potential local competitors.”

Beyond looking into different brands and their competition, it’s also crucial for prospective franchisees to research the consumers in their area and how involved they are with the current competition for a specific concept. A franchise location is nothing without its clients, which is why it’s important for future local owners to know how their business will stack up once they open up their doors for business.

According to Polanski, being armed with that extra bit of knowledge goes a long way.

“Being more educated and confident about a business concept and the segment in which it operates is just step one when it comes to why doing your due diligence is crucial. Step two dives deeper by taking a look at who the core customer is, and how they want to be reached by brands,” said Polanski. “Knowing how to market to a specific community is ultimately what will help franchisees outperform the competition. And that’s not something that should be overlooked when selecting which franchise is right for you.”