Franchising is a quintessential way of life for American business. The entrepreneurial spirit and broad-reaching conceptual ideas often lead to exciting new business models. Since franchising is a large portion of all privately owned businesses, and nearly half of all franchise brands are fewer than five years old, you will discover hundreds of younger franchises to buy.
Fresh and first-to-market brands offer significant upside for those who are first to invest in their franchises. If you buy early and the brand does well, you will reap exceptional profits, often for much lower start-up costs. Naturally, there is a downside risk to emerging brands, too. But with a bit of research and evaluation, you can evaluate which new franchise to buy.
Is it Really New?
Many prospective franchisees are interested in franchising specifically because the brand is already established and there is a track record of support and success. If you like that idea and have never owned or run a business entity, an emerging brand may not be for you.
But before you write off a new idea, evaluate just how “new” it actually is. It could be that the franchisor has several years of successful operations in company-owned stores and has recently expanded to franchising. With a solid history, the brand could be an excellent candidate for expansion through franchises. On the flip side, an utterly new concept will mean taking more initiative as an entrepreneur more than an established brand would demand.
The Financial Lens
Franchising is a unique niche when it comes to accounting. Not every accountant understands the reporting methodology required of franchisors. Of course, you will review the financials of any business you consider, but be sure to engage the expertise of a franchise accountant.
For an emerging brand, this is especially important to determine how the franchisor has used franchise fees and if any other early franchisees are doing well. If they are making money, you will see that. If they are not yet profitable, the new brand may create more financial risk than you can tolerate.
Support Always Matters
Even if you may take on more responsibility with a newer franchise concept, the franchisor’s support is always critical in the early months of ownership. A new franchisor should already have guidelines, training materials, and support documents at the ready. If you have managed a business operation previously, you will be better able to see gaps and strengths in the support plans and determine how much assistance is likely to be there (or not).
Who’s in Charge Here?
Review franchisor leaders to uncover any weakness in experience. Some will have executive experience in many organizations, others mostly with franchises, and others who believe in their brand but have little franchise knowledge. No one style of leader is ideal, but it’s good to know if you have to fill in with your expertise (if you have it). A strong foundation matters most because people come and go. With a solid franchise concept and execution, a brand can weather personnel changes.
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Your research on newer franchises will help determine your future fortunes or losses. The next great idea could be a perfect fit for your own experience and comfort with risk. Getting in on the ground floor can be exciting, is often less expensive, and holds promise for large future gains. Just be thorough as you investigate new brands while on your quest for the perfect franchise opportunity.
Source: https://www.franchisedirect.com