As I embark on writing this blog the song New York, New York and the phrase: “If I can make it there, I’ll make it anywhere…” runs through my head. After all, not every town sees life in the same way as New Yorkers. A similar comparison could be made with franchised businesses. A concept that does extremely well in one location may or may not have the same appeal in a different part of the country.
Let’s imagine you live in Baltimore. While visiting friends in San Francisco you discover they are franchisees of a business that provides irrigation services to commercial and residential clients. They are doing very well and love the business. As soon as you get home, you research the concept and decide it is just what you’ve been looking for. But will this business do well in your area? The answer will depend on many factors.
Your first step is to follow the process and learn about the brand. Questions of territory viability cannot be tackled until you understand the details of the brand. After the foundation is in place you can compare the population of the franchisor’s successful businesses to the population in your area. You should be able to request population data from the franchisor and by using the internet. Here’s what you should be looking for:
Total Population – Many businesses need a minimum population in a territory to provide enough potential customers to make the business successful. If the irrigation business needs several hundred thousand residents in a territory and you live in a rural area of a few thousand, this concept isn’t a good fit for you.
Population Density – If the business requires a retail location, how far will customers drive to get to you? Each type of business will draw customers within a finite radius. If you have a coffee shop, your customers will live or work within a mile or two of your store or they will drive by your store to and from work. If your franchise offers something needed infrequently – such as furniture or tax services, you might draw customers from 5, 10 or more miles. Once you determine your actual radius for drawing customers, examine the data within your draw area to see if there are sufficient people to keep your business thriving.
Demographic Characteristics of the Populations – Will your franchise appeal to a broad demographic of the population of your territory or does it have a narrower appeal? An authentic Italian deli might draw a variety of people, or it might just draw customers from an Italian background. If possible, find existing franchises in locations with a population make up that reflect your area and see if the concept does well. If the potential business serves teens or toddlers or seniors, does the territory in which you want to open have enough of the target customers? Don’t assume you know the answer – ask the franchisor for target parameters and do your research! The franchisor has a vested interest in your success. If they do not believe in the viability of your market, they should tell you.
Income Levels – Equally important to age and ethnic characteristics is the income levels of your population. While fast food and quick serve family restaurants may do well in a variety of locations, other concepts need to be in areas where the income levels are sufficient to the product or service you will provide. If you will be offering something most would consider a luxury item, such as laser hair removal, spa treatments, or custom closets make sure the average income is high enough to support your business.
Purchasing a franchise is not a guarantee of success. You will have the accumulated experience of those who have gone before you and you will have the training and support from the franchisor who has a vested interest in seeing you succeed. But to misquote a line used in many movies, failure is an option.
To maximize your chance of success and to reduce your chances of failure, it is important that you thoroughly research the franchise opportunity and that you also thoroughly understand the demographic makeup of the territory in which you wish to open. Not every concept will do well in every location. Sometimes success of a concept is a matter of good timing, whether because of current trends or the economy or even changes in the population density or makeup.
Which brings us back to the question of whether the residential landscaping franchise that does so well in Phoenix, Arizona will do equally well in Raleigh, North Carolina. Professional landscaping could be seen as a luxury item so you would want to be sure the average income of your population would support this type of purchase. You would also want to look for data on the number and value of the single-family homes in your area. Ask the franchisor for names of franchisees who work in areas with a similar population to your proposed territory and find out how successful these franchises are with the concept.
In any business, gut instinct and experience will go a long way towards helping you make important decisions. But when you are risking your own capital on the purchase of a franchise business, be sure that you back up your instincts with research and hard data.
If you are willing to work hard, becoming a franchise owner could open an exciting chapter in your life. Just be sure you eliminate as much of the risk as possible by getting all of your questions answered before you sign on the dotted line.
