If you are thinking of starting a business and the entrepreneurial spirit has swayed you, there is a good chance that you are trying to find a way to get something off the ground. What you will find, though, is that starting a business can be difficult. Not only is it hard to get a loan, but it can be difficult to make the first steps. This is why you may be interested in purchasing a franchise. A franchise is often a much more organized and foolproof way to get a business off the ground. Before you purchase a franchise, though, you want to make sure that you vet different businesses. Here is how to evaluate a food franchise opportunity.
- Look at the numbers. Your first step in analyzing a food franchise is to look at the numbers. Typically, you want to look at a graph of monthly revenue. Is there growth or is there stagnation? Ideally, you want to see growth. Moreover, you want to see specific numbers – specifically the numbers of other food franchises in the same industry.
- Match the numbers against your monthly overhead. After you have a good idea of what the numbers are, you want to match those numbers against your monthly overhead. If all your revenue is going towards overhead and other expenses, it may not be worth it. If you are taking home a nice profit and all the other expenses are settled, you may be looking at a solid business model. The key is to decide if you are sitting on a cash cow or a money pit.
- Is the type of business popular or waning in popularity? Some businesses are waning in popularity – mostly because trends change and people’s eating habits change. There are also some popular franchises, like Sweet Arleen’s - things like cupcakes and desserts don’t necessarily go out of fashion; they become staples. Ideally, you want to find a staple business – something that is not trendy. Eventually, trends will change and your business could be left on the corner with empty seats and shuttered doors.
- Is there decent foot traffic? When it comes down to it, foot traffic is incredibly important. If a franchise doesn’t have foot traffic, or strong visibility from the street, you could be buying into a bad bet. Ideally, you want your franchise to have easy foot traffic access. If the business is down an obscure alley, it will be difficult to pick up business. Moreover, marketing will be more expensive, because you will be trying even harder to get people in the door.
- Make sure there is a strong marketing plan. Of course, you also want to make sure that your franchisor has a strong marketing and advertising plan. One of the biggest benefits of buying into a franchise is that you get to benefit from a built in marketing and advertising plan. This is one of the only ways that will keep your business’ presence and brand in the consumer consciousness. In the end, if a franchisor doesn’t have a strong marketing plan, you may want to buy into a franchise that does.