Analyze The Market

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Do I need to understand a franchisee's local market?

Analyze The Market

The prospective franchisee's personal and financial qualifications aren't the only things you need to consider. You also have an obligation to thoroughly understand the market in which the franchisee is proposing to operate. It does no good - and a great deal of harm – if you've got the ideal candidate and business in the wrong place.

You must analyze the proposed market area yourself. Don't assume the franchisee knows how to do this. Some questions to ask about the area are:

  • What type of neighborhood surrounds it?
  • Who lives there?
  • What is the area's household income?
  • Is the population growing or declining?
  • Are the families young with children or are they older families whose children have moved out?
  • How many of your desired target customers live in the area?
  • How many target customers live within five miles of the location you are considering?
  • Is your competition represented in this area? Where? How strongly?
  • Is your competition doing well in this area?
  • Is the economy stable, growing or declining?
It's the same kind of data you collected when you opened your own business, but for a remote location. It may be difficult to acquire and you should involve the prospective franchisee in data gathering. Once you have the market data be brutal in evaluating it. There's no room for sentiment in this assessment. There's always another location.

   

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