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Franchise Models: How to Evaluate Franchise Opportunities

Wondering what to look for when choosing a franchise model? Our comprehensive guide to franchise models and evaluating franchise opportunities will help.

DIFFERENT FRANCHISE MODELS

Franchising is a lucrative opportunity for entrepreneurs to build a business and invest in their future with the backing of an established and successful brand, providing a flexible, mutually beneficial platform for both franchisors and franchisees to achieve their goals. Franchise business models can be broadly linked through business strategy, franchisee involvement, investment, and operational and marketing support. When evaluating franchise opportunities, consider a few key categories:

PRODUCT DISTRIBUTION FRANCHISE

Similar to a manufacturing franchise, except the franchisee’s main responsibility is to distribute the products provided by the franchisor. Franchisees are required to make payments for using trademarked products of the franchisor/manufacturer. Unlike the business format franchise model (more on that below), the franchisor does not provide continuous support to franchisees.

MANUFACTURING FRANCHISE

Pepsi and Coca-Cola serve as examples of this type of franchise business model. Here, the franchisor is a manufacturer parent company that gives exclusive rights to the franchisee to produce and distribute its products in well-defined areas. 

BUSINESS FORMAT FRANCHISE

Under this franchise business model, the relationship between franchisor and franchisee is ongoing and reinforced through training, marketing support, and strategic planning toward expansion. This format is particularly advantageous to the franchisee, who receives guidance from a parent brand with a proven track record of success. 

WHAT TO LOOK FOR IN A FRANCHISE OPPORTUNITY 

Two factors often jump out as being key components in franchisee satisfaction: franchisee support and return on investment (ROI). Too often, prospective franchisees focus solely on ROI while discounting the importance of ongoing support to achieve and maintain lasting sustainability. Beyond ROI, certain variables will have a massive impact on long-term success. 

TRAINING

Regardless of the industry and a new franchisee’s background, comprehensive training is a key contributor to ongoing success. The best franchisors employ experts whose sole job it is to hand down their experience within an industry, providing franchisees with operational knowledge to give them a competitive edge over other businesses. 

When evaluating franchisors, it’s ideal to understand how they learn and improve, how they communicate those learnings across the system, and leverage the shared learnings into best practices. Franchisees should expect initial and ongoing training to help them build their business. Lack of a well-documented training program or poor reviews from current franchisees are a red flag that a company does not have a well-developed training program. 

MARKETING

Marketing support is an essential benefit to partnering with a franchise. A well-honed approach is what keeps clients walking through the doors and business booming. As you evaluate franchise opportunities, keep an eye on how different franchisors support their franchisees on acquiring and retaining customers. Best advertising practices are constantly changing, and it is important to understand the effectiveness of the campaigns prospective franchisors are executing.

TRANSPARENCY 

Another component of a franchisor’s support that’s worth review is how they control costs. Businesses have various types of expenses, from payroll, facilities, and maintenance to utilities, cost of goods sold, and supplies. Great franchisors leverage their scale and buying power to reduce expenses for their franchisees. A review of their Franchise Disclosure Document (FDD) will provide insight on which of these expenses will fall to the franchisees and which ones will be the franchisor’s responsibility. The FDD will also give you a sense of historical earnings statistics, helpful context as you formulate your franchise business plan. 

MY SALON SUITE: A MODEL FRANCHISE

MY SALON Suite provides comprehensive training, expert marketing, and ongoing support for franchisees and staff to ensure that everyone has the knowledge and tools to run a successful, sustainable salon business franchise. MY SALON Suite stands apart by offering prospective franchise owners the flexibility to run their business as they see fit while providing the resources to encourage them to expand on their own time.Learn more about the salon suite franchise opportunity with MY SALON Suite today.