franchise-buying decision


Investing in a franchise business is a significant financial decision that shouldn’t be taken lightly. With so much at stake, it’s only natural to seek advice from friends and family who have been down that road before. But how much weight should you give their franchise recommendations when choosing an opportunity?

While loved ones’ insights can provide helpful perspective, basing your final franchise buying decision solely on their experiences and subjective opinions would be unwise. There are many critical factors to evaluate objectively during the franchise research process.

The Potential Pitfalls Of Personal Franchise Recommendations

On the surface, getting a franchise recommendation from someone close to you seems like a good starting point. If a trusted friend raves about how well their franchise has worked out financially and personally, that’s encouraging. If they share frustrations about a particular franchise system, that’s a red flag to heed. However, relying too heavily on just one or two personal opinions can be problematic because of things like:

  1. Differences In Expectations And Goals

Even if your friend is absolutely thrilled with the performance of their franchise, that doesn’t necessarily mean it’s an ideal fit for your specific lifestyle expectations, income goals, risk tolerance, etc. What they value most from the opportunity may or may not align with your wants and needs.

  1. Location Variables And Economic Factors

Just because a franchise was wildly successful for your friend’s location doesn’t guarantee the same results where you plan to operate, even if it’s the same franchise brand. Markets can vary drastically based on geographic area, population demographics, competition levels, commercial rent prices, and other regional dynamics.

  1. Work Ethic And Commitment

When you invest in a franchise, the amount of effort you dedicate greatly influences your odds of success or failure. Unfortunately, some franchise owners put in minimum effort and then complain about the business not meeting their expectations. Do you know how committed and hardworking your friend was with their franchise business?

  1. Skills And Resources

Everyone has varying backgrounds, financial resources, and toolkits of skills to bring to a franchise venture. Just because your friend found success may have had more to do with their capabilities than the franchise’s quality, carefully consider whether your resources and proficiencies align with what an opportunity demands.

  1. Familiarity Bias

We all have an innate tendency to prefer the familiar over the ambiguous. So, it’s easy to convince yourself that any franchise that worked for someone close to you is automatically a lower-risk bet. In reality, there could be much better options you aren’t even aware of yet.

Personal anecdotes alone shouldn’t be the deciding factor when choosing a franchise to invest in. While success stories can inspire and provide kernels of wisdom, much more comprehensive research and professional guidance are required to find the ideal opportunity.

A More Balanced Approach to Franchise Research

Rather than relying solely on informal peer recommendations, franchise investors must take a well-rounded, objective approach to exploring opportunities and assessing pros and cons. A few key steps:

  • Extensive Brand Research – For any franchise that piques your interest, invest serious time studying the franchising company, including leadership, values, history, training and support systems, growth trajectory, litigation history, franchisee satisfaction metrics, and long-term development vision.
  • Industry and Competition Analysis—Look beyond the brand to evaluate the full competitive landscape, market demand, growth potential, and economic risks/opportunities for the industry you’d be entering.
  • Financial Performance Analysis – Successful franchisors must disclose detailed franchise disclosure documents (FDDs) that provide financial performance data from existing franchisees so they can evaluate costs, revenues, profitability potential, and overall statistical odds of success.
  • Personal Compatibility Evaluation – Even a terrific, highly profitable franchise opportunity could be a poor choice if the day-to-day operations and business model don’t align with your professional talents, passion, and lifestyle goals.

Work With A Franchise Consultant

Engaging with an experienced franchise consultant or advisory firm not affiliated with any specific brand is wise. Their objective guidance will help shape your criteria, narrow your options based on your factors, and facilitate effective due diligence.

While franchise recommendations from people you know and trust can serve as general starting points of reference, they shouldn’t be the be-all, end-all for making such a significant personal and financial commitment. Take a balanced, thorough approach to researching any franchise opportunity from all critical perspectives. With so much at stake, you can’t let personal biases or assumptions lead you astray.

For more details on diverse franchising sectors in Australia and how to invest in one, call The Franchise Institute at 1300 855 435. Alternatively, please use this contact form.

Post A Comment

Leave a Reply

Your email address will not be published. Required fields are marked *