THE SIX-FACTOR ANALYSIS

Choosing the perfect franchise is the result of a rigorous, thoughtful, and structured due diligence. My candidates explore individual franchises through adherence to The Perfect Franchise Six-Factor Analysis. These six factors will enable you to gather and track information, recognize areas for additional learning, and allow for final brand analysis and assessment. These are the decision points that will determine if a brand is The Perfect Franchise for you.

THE SIX FACTORS

1. HOW DO I GET CUSTOMERS?

A great business model is nothing without customers. This factor addresses the brand’s customer acquisition strategy and lead generation. It is important for you to understand the sales and marketing methodology, your role, cost, etc. Questions include:

  • What does the lead generation system look like?
  • Is there a clear and predictable procedure for lead generation?
  • How does the franchisor drive customers?
  • What is the franchisee’s role in customer acquisition?
  • What is the cost of gaining a customer?
  • What are the key elements that maximize the sales and marketing process?
  • Ultimate question: Am I, as the franchisee, comfortable with the customer acquisition and lead generation process the brand provides?

2. HOW DO I SERVE MY CUSTOMERS?

Once customers express an interest, you must deliver your product or service at a high level. This factor focuses on how you can maximize your business’ operations. Areas of exploration are hiring, training, supply chain, vendors, etc. Questions include:

  • What franchisor support is provided for hiring, training, and managing staff?
  • What does the supply chain look like?
  • Who are the suppliers?
  • What are the factors that can improve a franchisee’s operations?
  • What are the operational challenges in the system?
  • What are the operational areas of strength?
  • Ultimate question: Does the franchisor provide a strong enough support ecosystem for me to succeed?

3. WHAT IS EXPECTED OF ME AS THE FRANCHISEE?

Before joining a franchise, you need to know what will be expected of you and gain role clarity. Ask questions such as:

  • What does a day, week, or month in the life of a franchisee look like?
  • What is my expected time commitment?
  • Is there flexibility in my schedule?
  • What are the franchisee’s roles and responsibilities?
  • How does the franchisee’s role evolve over time?
  • What positions can franchisees hire for?
  • What are the traits of your most successful franchisees?
  • What type of franchisee struggles with this brand?
  • Ultimate Question: Do I think the role of a franchisee in this brand is a good match for me?

4. WHAT DO THE ECONOMICS LOOK LIKE?

Freedom, independence, and being your own boss are great, but you need to make money. It is crucial to understand the investment costs, ongoing expenses and your income potential. Questions include:

  • What is the cost of entry for a franchisee?
  • What is the income potential?
  • What are the ongoing fees? (e.g., royalties, ad funds, etc.)

This factor also provides the opportunity to dive into the drivers and limiters of financial success in a specific brand. Learn about the key performance indicators (KPIs) and how you can turn the dial to improve financial results. Finally, you will want to model the financials to appreciate the brand’s potential. The following questions will enable you to uncover the levers to pull or the dials to turn to maximize revenue and profitability once you join a franchise.

  • What are the things you do to maximize the impact of your marketing spend?
  • What aspects of the sales cycle are the most critical? How do you optimize them?
  • How do you manage staffing levels to ensure you are appropriately staffed?
  • Do you actively use all the square footage of your location or could you generate as much revenue with a smaller footprint? (minimizing fixed real estate costs is a great way to lower expenses)
  • What are the KPIs that drive revenue and what are top performing franchisee’s doing to maximize revenue?
  • What are the KPIs that drive expenses and what are top performing franchisee’s doing to minimize expenses?
  • Do you have a pro-forma you can share?
  • Ultimate Question: Can this franchise meet my financial expectations?

5. WHAT IS THE BRAND’S UNIQUE VALUE PROPOSITION TO A FRANCHISEE?

My clients are sought-after by franchise brands. They are high potentials with the commitment, focus, and skills to succeed in franchising. I share this confidence with my clients, so they approach the due diligence process with a mindset of self-assurance. Yet, there are bumps in the road for all franchisees, and it is important for you to clarify how the franchisor will help you through them. You want to ensure that the franchisor is a true partner. Questions include:

  • How will you support me to scale the business?
  • How do you help me when challenges arise?
  • What are the aspects of the business where new franchisees struggle?
  • What can I do proactively to avoid those struggles?
  • Ultimate Question: Is the franchisor going to be my partner and support me through thick and thin?

6. WHAT IS THE UNIQUE VALUE PROPOSITION TO CUSTOMERS?

In any business there will be competitors. What is important is joining a business that is differentiated and able to gain market share. Generally, it is not the product or service that is differentiated but how it is delivered. Understand how the value proposition is articulated in marketing, at the point of sale, and how it manifests itself in the customer experience. Questions include:

  • Who is the competition?
  • How is the brand different from competitors?
  • How is that distinction articulated in marketing materials? During the sales process?
  • How does the customer experience the difference?
  • Ultimate Question: Is the franchisor’s value proposition powerful and will it enable me to grow a strong business?
  • During due diligence, I revisit these six factors often with clients. During those discussions we explore concerns. If there are none, the process continues forward.

The Perfect Franchise

The Perfect Franchise is the one book you need to read if you are considering franchising.

Mark Schnurman is one of America’s top Franchise Consultants, and the founder of The Perfect Franchise. Mark outlines a clear process for finding the perfect franchise.

In straightforward language, he explains how to:

  • Decide whether franchising is right for you;
  • Determine which franchise will optimize your chances of success;
  • Conduct due diligence;
  • Fund your franchise investment;
  • Live the life you dream about.

If you want to be your own boss, this is the book for you!