Setting up a franchise is exciting, but it also comes with certain risks and can therefore be a little scary.
However, with thorough market research and investigation, you can minimise and find the perfect location for your business.
Product market research is essential to find out if there is a market for the franchise you want to invest in in your region. This way you can ensure that there will be people willing to spend money on your products or services on opening day and beyond.
When looking for a suitable franchise opportunity, you should consider the following factors to determine if your product is marketable in the desired location.
Franchisor's territorial requirements
Before you begin your investment, it is important to check with the franchisor to see if it has any specific territory or territorial requirements.
Often, franchisors have already conducted preliminary research to find out where they want to locate franchisees. Before contacting a franchisor, check the "Available Locations" section of the franchisor's Franchise Direct website. This will ensure that they are looking for franchisees in your region.
Size and demographics of your customer base
Even if the franchisor you want to work with is available in your locality, you will need to make sure that the franchisor has the right customers in the geographic area of your desired location. To do this, you will need to roll up your sleeves and do some research.
Analysing the customer landscape is time well spent. After all, you will only have a full house on opening day if you have enough potential customers in the vicinity. In addition, you can benefit from word of mouth, among other things, to boost business in your area. Without enough suitable buyers, you will struggle from day one.
There are several ways to gather information about the demographics and potential clientele in your area. A good starting point is public offices, which can provide a wealth of data on the population where you want to start your business.
In addition to customer demographics, you should also analyse your regional competitors. A thorough internet search, but also a site visit, will help you to get a general idea.
If you see several competitors in the area, don't be discouraged. It's good to know that there is a market for what you offer. If you are entering a highly saturated area, such as quick service restaurants or fitness franchises, you are likely to see numerous competitors. Take this as a sign that your offer is in demand and used in the region. At the same time, however, you should consider whether the franchise you want to set up is sufficiently different from existing offerings.
Market demand
Ultimately, you should let customers have a say in what is offered in the area. Therefore, in addition to concrete data on customers in the area, you should collect qualitative data. Qualitative data is not linked to a number. Instead, it comes from sentiment analysis on social media forums, opinion polls, personal conversations and much more.
This type of research gives you more than just quantitative or numerical data on purchasing power and demographics:
- It allows you to gauge interest in your franchise idea.
- It allows you to find out if your area is ready for your ideas and if your franchise will be enthusiastically received on opening day.
If you still have doubts about the steps to follow, you can look at our Ultimate Guide to Franchising. There you will be able to solve all your doubts regarding your future business.