Business For Sale & Franchise Search Engine  
My Account
Search Businesses For Sale


to refine your search results use advanced search  
Franchise Opportunities

Sell Your Business, Starting at $20.99 per month
Small Business Resources > Three Signs Of A Franchise Winner

Three Signs Of A Franchise Winner

There are over 2,500 different franchises for sale right now. Trying to choose the right one might seem like an impossible task. One that is even more intimidating considering the large financial investment at stake. If you are a first time franchise purchaser, where should you begin? The answer is not easy; every franchise is unique and there are hundreds of characteristics to review. That said, certain characteristics keep popping up when we examine the best franchises.

Here are 3 signs of a great franchise concept.

1. Multi-unit Ownership
The proof is in the pudding. The best indication that a franchisee is happy with his business is if he spends more money to purchase another unit or an additional territory. The logic is the same as why Honda has such a strong reputation in the car market. If your uncle Jeff has bought three Accords in a row, Honda must be doing something right.

For the most part, multi-unit owners start with one store which becomes so successful that the want a second and so on. In order to finance a second store, a lender will examine the first store's cash flow. If a franchise wasn't financially viable, it would be nearly impossible to open additional units.

Multi-unit ownership is also an indication of operational efficiency in a concept. With some franchises, there is so much work that is impossible for the franchise owner to focus on anything but day to day operations. The book, "The E Myth" talks extensively about this trap of getting stuck "working in your business" vs. "working on your business." Even if you never plan to open multiple units, this is an important characteristic, because more likely than not, you would eventually like to retire or at least take a vacation one day.

Be wary of franchise owners who explain low multi-unit ownership by suggesting franchisees make enough money with just one unit. If there is one thing history has shown, people rarely decide they have "enough" money.

2. Proven Franchisor Track Record
There are three items two think about when examining the franchisor's track record. The first is an understanding of how much risk there is that the franchisor might go out of business. Unfortunately, many of the 2,500 franchise concepts available just won't make it as sustainable businesses. If you purchase one of these concepts, you may lose much of your investment.

Second, the franchisor's track record should give you an indication about the quality of the concept. Did the franchisor own several successful stores for many years before deciding to franchise his concept or did he just decide one day that there was good money in franchising so he better come up with a concept.

Third, franchisors with longer track records have more established training and support programs. While you might save a few thousand dollars buy getting into a franchise early, chances are you won't get much for your investment. New franchisees haven't had the time to put together development support or training programs or marketing campaigns. Also, if you are one of the first buyers, you are the guinea pig which often means more risk. Maybe a new food concept works great in a mall food court or maybe it doesn't? Wouldn't be nice if you weren't the one who had to run the experiment?

3. Strong, independent franchisee association
Unfortunately, the unspoken reality is that the franchisor's and franchisee's interests aren't always aligned. Eventually, there will be disagreements over finances, marketing programs or development issues. Knowing that issues are sure to arise, it is helpful to know that you will have an organized group of franchisees who can relate to your situation. Independent associations have many benefits. In addition to creating leverage for the purpose of negotiating with the franchisor, an association also can improve communication among franchisees. Independent associations also allow members to pool resources to hire competent professionals such as lawyers or financial advisors or marketing consultants. Finally, like with any organization, a collective, institutional memory is created. The AFA has an excellent article on associations here.

It is also a negative sign if the franchisor goes out of its way to discourage an association. It usually means that the franchisor does not have the franchisees best interests in mind and is afraid of having to deal fairly with franchisees.

In addition to independent associations, franchisees may also develop a coop to purchase goods at a discount or control a portion of the system's advertising budget or develop a lobby group for a specific issue. All of these our good signs.

About the Author
Jamie is the founder of The leading source for franchise research, news and community. He is a previous owner of a major franchise and has a background in finance, investments and start-up businesses.

Related Resources
Buying a Franchise
10 Reasons to Buy a Franchise
Advantages & Disadvantages of Owning a Franchise
Advantages and Disadvantages of a Start-Up Business
Advantages of Investing in a Franchised Business
An Overview of Today's Business Opportunity Market
Auto Franchises
Become a Franchise Consultant
Businesses under $10,000
Buy a Franchise or Create Your Own Start-Up
Buy a Great Franchise Opportunity
Buying A Franchise
Buying a Franchise with Bad Credit
Coffee Franchises
Do Home Based Businesses & Franchises Really Work?
FDD's Item 19 Can Help You Decide If You Should Buy a Franchise
Food Franchises
Franchise Alliance
Franchise Information
Franchise Lawyers
Franchise Loans - Apply for a Loan to Buy a Franchise
Franchise Reviews
Franchise Royalties - What are Franchise Royalties?
Franchises - What To Consider
Free Small Business Magazines
Healthy Fast Food Franchises
House Cleaning Franchises
How Much Does a 7-Eleven Franchise Cost?
How Much Does a Dunkin Donuts Franchise Cost?
How Much Does a Franchise Cost
How Much Does a Krispy Kreme Franchise Cost?
How Much Does a McDonald's Franchise Cost?
How Much Does a Panera Franchise Cost?
How Much Does a Pinkberry Franchise Cost?
How Much Does a Pizza Hut Franchise Cost?
How Much Does a Starbucks Franchise Cost?
How Much Does a Wendy's Franchise Cost?
How to Finance a Franchise
How to Increase your Chances of Owning a Successful Franchise
How to Make More of Your Franchise
Is Franchising For You?
Is Starbucks a Franchise?
Low Cost Business Ideas
Managing Your Franchise Business
Master Franchise Information
Questions to Ask a Franchisor When Buying a Franchise
Reasons to Use a Franchise Consultant
Receive a FREE Franchise Consultation
Sell a Franchise
Seven Secrets to Buying a Franchise
Should I Franchise My Business?
Ten Common Mistakes Made by Franchise Buyers
The Differences Between a Franchise & Business Opportunity
The Differences between Large and Small Franchises
The History of Franchising
Three Signs Of A Franchise Winner
To Franchise or not to Franchise
Top 5 Buying Factors when Buying a Franchise - Part I
Top 5 Buying Factors when Buying a Franchise - Part II
What is a Master Franchise?
What is a Uniform Franchise Offering Circular (UFOC)?
What To Take Into Consideration When Starting A Franchise
What to Think About Before Buying a Franchise
Why Should I Buy a Franchise?
©2024 MH Sub I, LLC dba Internet Brands
Broker Membership | Terms Of Use | Financial Disclaimer | Privacy Policy | Cookie Policy | Resources | Franchise Opportunities | Website Traffic Ranking | Sitemap | Careers | Contact Us | Manage Preferences Your Privacy Choices