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How Do You Know If a Franchise Is Successful?

By Franchise Information July 19, 2022

In an age where countless business startups fail, franchising can provide invaluable security and support. If you’ve ever wondered why you should start a franchise, partnering with a nationwide chain can reduce your overall risk. 

But before you jump into the next opportunity that comes your way, make sure to determine how successful the franchise truly is. How do you investigate a franchise? Here are seven things to look for when evaluating a franchise’s success.

1. Revenue

The most direct way to measure the success of any business is to look at its revenue. Obviously, you’ll want to find a franchise that is drawing steady profits. But how do you investigate a franchise, financially speaking? 

When the franchisor presents the franchise agreement, they’re also obligated to provide a disclosure statement. Look at this document carefully, as it will reveal the company’s finances over time. The most successful companies don’t just demonstrate strong profits but also keep detailed records that back up their claims to industry success.

2. Unit Growth

Unit growth can be a measure of success. This refers to the number of franchise locations that are in operation. If the company can open additional franchises, this is typically a strong indicator of company success. A steady pace is also a good indicator. Too many newly opened franchises at once can put strain on a system.

Conversely, if the company has been shutting down locations in recent months, this could reflect a contraction in their overall growth. Paring down their locations can help them re-focus, but you may be wary of where the company currently stands.

3. Strong Support

A sure sign of success is the strong support offered by the franchisor. In fact, this support is one of the main reasons why you should start a franchise since you’ll benefit from a company that helps you with training, supplies, marketing, and more. 

This is doubly important when it comes to marketing. When the parent company devotes its resources to marketing, it will increase consumer demand and produce greater success. And the more your franchise succeeds, the more the company will be able to invest in marketing, creating steady, manageable growth.

4. Brand Awareness

How familiar are you with the company? Many nationwide franchises enjoy strong name recognition thanks to their widespread operation and ad campaigns, many nationwide franchises enjoy strong name recognition. 

While brand recognition alone doesn’t necessarily indicate success, a reputable name can still demonstrate that the company has “staying power,” regardless of the U.S. economic climate.

5. Industry Growth

You’ve heard the old saying, “a rising tide lifts all boats.” With franchising, it happens to be true. If your franchise operates in a growing industry, you’ll be able to capitalize on industry and consumer trends. 

Again, this doesn’t necessarily mean that each franchise will be successful, and some companies may enjoy greater success than others. But growth within a specific sector suggests a greater possibility for franchisees operating within the industry.

6. Low Employee Turnover

Granted, most franchises don’t offer a strong career path unless you go into management. However, successful franchises will produce satisfied employees. 

If a franchise has a lot of problems maintaining their staff, this could indicate that they can’t afford to pay competitive wages or that the company culture doesn’t foster loyalty among their workers. 

Conversely, a low employee turnover rate may indicate that the company invests in its staff members, resulting in a healthy, positive work environment.

7. Satisfied Franchisees

How do you investigate a franchise locally? Start with the franchise owners in the area. The most successful franchises keep their franchisees happy and secure. Spend time talking to the franchise owners in your area. They may not divulge company secrets, but they can still give you a glimpse into what it’s like to partner with the franchise organization. 

This is a wise tactic, as it will provide you with a better idea of why you should start a franchise with that particular company. If the franchisees appear overwhelmed or too busy to speak with you at all, this could be a red flag that the franchise isn’t performing well, and that performance is rubbing off on their franchise operators.

The Search for Success Begins Today

The first step to finding a successful franchise can begin today. Franchise.com offers a free franchise search tool that you can use to locate franchising opportunities in your area. 

Use Franchise.com to see if there are any opportunities near you, and consider what it might look like to operate your own franchise location. Who knows, you may find yourself in a new career and make the company’s success your own.

About the Author - Franchise Information

A Trusted Industry Leader Since 1995. Founded in 1995, Franchise.com was one of the first franchise recruitment websites in the world. Today, we continue to be the 'go to' place for people beginning their business opportunity search and the journey of franchise ownership as well as for those already involved in the world of franchising.
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