When you have strong credit, your franchise's financial...
With so many brands available in Canada, it's all too easy to feel overwhelmed by choices and decide to "go with your gut" when it comes to a franchise selection. Maybe's it's the ice cream they sell that you love or the education service that helped your kid ace their exam that you land on, before you've dug as deep as you needed to.
While it's great to believe in a product or service, what looks great on the surface could turn out to have some hidden problems below. Before you decide on a brand, keep the following potential nightmare scenarios in mind.
The model is failing
The health of the chain overall is vital when it comes to a franchise. If current franchisees are not doing well, you could find yourself in the same boat. If the entire brand is suffering, you'll struggle when it comes to support and other areas, such as the supply chain, and it may not even matter in that situation if your own location is doing well. Evaluate the franchise disclosure document to gain some insight into the brand's health, and don't forget to talk to as many current franchisees in the system that you can.
The market won't work
A franchise can be incredibly strong, but that doesn't automatically make it the best choice for you. The brand needs to be the right fit for your local market. An educational franchise, for example, may not do as well in a commercial area with largely childless people as it would near homes with families. Take a close look at area demographics to make sure they align with the consumer base you need for success.
Over-saturation in a market can be another concern. If there are too many locations of the same brand or from other brands offering similar products or services, you will likely face an uphill battle.
The day-to-day just isn't for you
A concept for a franchise can sound perfect on paper but end up much less so in reality. Ask to job-shadow a current franchisee with the brand so you can see what daily life may be like. What a franchisee does each day will vary by brand and industry. You could be on your feet all day supervising employees, or you may be driving around on sales calls. You want to go with the franchise that's the best fit for the business activities you actually enjoy doing and not all of the ones you can't stand.
Some new franchisees fall into a fantasy trap of being hands-off while profits roll in. Remember that this is not very likely, particularly in your first few years. You will be very involved in all the operational aspects of your business from the start, so it should feature things you enjoy and also activities you are comfortable doing.
Before you decide to go with a brand, make sure you've done your homework. With an investment this significant, gut feelings are simply not going to cut it.