A Simple Way to Evaluate a Franchise Opportunity
by Ed Teixeira
These simple guidelines can be used to begin an evaluation of an existing
franchise opportunity. These guidelines also represent the foundation for
building a franchise concept from an independent business. Follow this list to
find important questions and attributes that you should consider when you search
for a particular franchise. When you’re finished, ask yourself if the franchise
program passes the test.
- Business Traits-the franchise must have a certain uniqueness
whereby it’s different in terms of products, services, markets,
- Operational Simplicity- a franchisee should be able to learn
how to operate the franchise in a fairly short period of time.
- Adaptability and Demand- the franchise concept should work
well and adapt to various locations and markets, with a strong
demand for the products and services
- ROI- there needs to be a good return on investment and
profit after the initial franchise, advertising fees and
- Strong Management Team- the franchisor needs to be
represented by a strong management team. It takes more than a
few people to lead a successful franchise operation.
- Business Credibility- the franchisor should have a good
track record and successful history.
- The Business must be Teachable- there needs to be good
systems and procedures in place that are well documented.
These are possible “red flags” that you should be aware of. If any of these
arise be sure to follow up and confirm whether or not they are problematic.
- The product or service has a short life span. It can
be a fad or short-lived concept.
- The gross margins are too low and high revenues are
needed to support the franchise royalty and other fees.
- The skills to operate the franchise are complex and/or
take a significant period of time to teach and learn.
- The franchise relies on repeat customers and special
service. Professional services like legal and accounting are
- The franchise demands unique market characteristics
which are not easily found. As such, the business location has
very special requirements.
- The franchise has very complex and detailed audit
- The franchise and similar franchises are failing or
When looking for the right franchise opportunity it’s important to determine
if the franchise can pass a preliminary test. Using the approach outlined in
this article can provide a simple and productive method to identify your most
desirable franchise opportunities.
© 2010 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He
can be reached at