Total Franchise Illumination: 14 critical factors franchise explorers should act on.
External and Internal factors may be more important than the visible factors of a franchise concept. Know what they are, and what to do about them.
Total Franchise Illumination means you understand the major factors of a franchise concept and how it applies to you, how you evaluate it and its potential impact.
These factors comprise our Franchise Evaluator which is a matrix designed to highlight big-picture External factors – the market environment in which your business will operate, and the Internal factors – how the franchisor is structured and operates the franchise, including the relationship you will have with your franchisor.
The fourteen external and internal factors should help you:
- Understand many of the major facets of a franchise concept that could affect your business,
- Give you a sense of the areas you should be considering, regardless of the brand or industry, and
- Recognize what works for you, what does not, what you can live with, and what is non-negotiable as you evaluate.
While you certainly can add, remove, or re-prioritize factors as you see fit, the point is to put subjective factors aside, bring objective factors to the forefront, and especially give visibility to factors you may not have thought existed or mattered. Use and adapt the seven external and seven internal factors of the Evaluator to suit your needs, but be sure to pay attention to which factors are most important to you.
Above all, use these criteria as objective information to get an intimate understanding of the franchise concept and whether or not it will work for you.
The Seven External Factors of the Franchise Evaluator
- Market Size – What population are you serving? Is your market broad, niche, or somewhere in-between?
- Industry Trend – Is the industry developing or mature?
- Product & Service Drivers – What drives the purchase of the product or service? Is it a “need-to-buy” or a “want-to-buy”?
- Real Estate Needs – What type of location, if any, is needed to deliver the product or service? If real estate is needed, are the requirements flexible or stringent?
- Competitive Climate – Are competitors a major factor in operating your business? If so, is competition sparse or saturated? Will it matter to your business?
- Regulatory Climate – Are the business’s products or services regulated, or do they require licensing? Will you or your employees require special licensing? If so, is the regulatory climate strict or lax? Will this affect recruiting employees?
- Brand Recognition – How well would potential customers recognize the brand? Is it unknown or well-known? Is it emerging, fading, or static? Does it matter?
Understanding each of these external factors will give you a rough, back-of-the-envelope
way to know which factors are must-haves and which you can grant a little flexibility as you evaluate.
Also, if you identify external factors that don’t work for you with respect to a particular category or brand, there is no reason to move forward to consider the internal factors. It is time to walk away.
The Seven Internal Factors of the Franchise Evaluator
- Operation Model – How does the franchise business operate? How does it make money? Are financial performance representations made?
- Franchisee Role – What role is the franchisee expected to play in operating the business?
- Franchising Experience – How experienced is the franchisor at being a franchisor?
- Leadership – What is the tenure, background, and commitment of the franchise’s leadership?
- Franchisee Engagement – How often and how well does the franchisor engage franchisees?
- Financial Health – What kind of financial shape is the franchisor in?
- Operational Systems – How developed are the systems on which you will rely to operate your business?
In much the same way external factors shape the business in which you operate,
these internal factors have a material effect on how your business operates. You will
notice an interdependence between external and internal factors, in much the same
way there is an interdependence between franchisor and franchisee. Both sets of factors are important, and both are required to paint as complete a picture as possible.
Our free guide Franchising: Decoded and Demystified outlines the inputs and sources of information for each of the factors.
Download it here, or if you’d like a free concept evaluation using our Franchise Evaluator method, schedule one here.