Is An Emerging Franchise a Good Investment?

Would you rather buy a mature, established franchise brand or an emerging franchise that you believe is an up and comer? The answer may not be as obvious as you think...

It is like Yin and Yang. There are advantages and disadvantages to each, but if you are like most people, you probably believe that by going with a name brand you will improve your chances for success. This is why it is most important to be knowledgeable about product trends, rival services, location advantages and disadvantages, as well as comparable markets relative to your  franchise of interest.

By definition, a name brand is most likely to be in a mature industry and have a saturated market, which might give you a competitive advantage, but also means that most of the best locations are already taken and if one is available, it would probably be offered to one of their seasoned multi-unit franchisees. Also, due to the shear numbers, your success or failure are statistically insignificant to their operations.

Consider this example: In 1986, "Subway" had about 350 franchisees and if you had a problem or concern, you probably could have called Mr. DeLuca (the owner) directly and had it resolved in short order; today, there are over 39,000 "Subways" and just by the shear numbers there is no way they could deal with each individuals problems. You see, in the early years, the success of its initial franchisees is extremely important to the success of the franchise, so any good franchisor is going to go out of their way to make sure that you are successful; additionally, by being one of the early subscribers, as in the example I stated above, you will grow with the company and by now would have owned a territory or have been a large multi-unit operator. Franchise Youniversity SuccessWhatever franchise you choose you should find something that you like and do your due diligence:

  • site selection              traffic counts
  • demographics           cash flow analysis

A good organization that can help in this regard is SCORE, which stands for the Senior Corp Of Retired Executives; it is funded under the SBA, there are offices in most major cities and they will give you unbiased counsel and mentoring free of charge; their website is www.score.org. Yin or Yang, which ever you choose, make sure that the franchisor is there to support you and have open lines of communications to assist you, leading to a rewarding and fun career in franchising.


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