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Measuring a Franchise Company

by Ed Teixeira

There are a number of ways to measure or evaluate a franchisor. These measures when properly applied can provide a profile of a potential franchise or an existing franchisor in the start-up mode.

Franchise Success Factors

  1. Business Traits -must have a certain uniqueness whereby its different in terms of products, services, markets, investment level
  2. Operational Simplicity- the business should be such that a franchisee can learn how to operate it in a fairly short period of time
  3. Adaptability and Demand- the franchise concept should work well and adapt too many locations and markets. There should be a strong demand for the products and services
  4. >

  5. ROI- there needs to be a good return on investment and profit after the initial franchise fee and royalties
  6. Strong Management Team- the franchisor needs to represented by a strong management team. It will take more than one person to lead a franchise operation.
  7. Business Credibility- the company should have a good track record and successful history
  8. The Business Must be Teachable- there needs to be systems and procedures in place. There should be documentation

Franchise Negative Factors

1. The product or service has a short life span. It's a fad or short-lived concept

2. The gross margins are too low to support a business with a royalty and other fees

3. The skills to operate the business are complex and/or take a significant period of time to learn to operate

4. A business type which relies on repeat customers and a special service. Professional services like legal and accounting are examples

5. Unique market characteristics which are not easily found. The location for the business has very special requirements

6. The business has very complex and detailed audit requirements

7. A company or business which is failing or marginally successful

Whether you're evaluating a potential franchisor or a new franchisor in the start-up mode it's important to qualify the franchisor and its concept. The above items can be used as a checklist that can be applied to the franchisor.

 

2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com

 

 

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