Which is the Best Franchise?
People interested in acquiring a franchise often ask the question “Which is the best franchise?” There is no real answer to that question. Certainly, there are a number of websites and publications that publish lists such as the Top 10 Home Based Franchises or the Top 10 Pet Franchises. There is also the annual Entrepreneur Franchise 500®, which has been around for 30 years and lists what in their opinion are the top 500 franchises for the respective year. How objective these lists are is based on the criteria used to select the best franchises and how that criterion is applied. Just because a franchise is ranked as “The Fastest Growing Franchise” does not mean it is the most profitable franchise or that it is even financially viable. In some cases the website or publication issuing the list may have ulterior motives such as advertising revenue. In other words, is the franchisor paying for its ranking?
The real question that should be asked by a prospective franchisee is “Which is the best franchise for me?” In assessing a franchise opportunity one size definitely does not fit all. There are between 1,200 and 1,300 franchise companies operating approximately 76,000 franchised outlets in Canada. So, at first glance there appears to be a huge number of franchises opportunities to choose from; however, those options can narrow down very quickly.
Firstly, there is the affordability factor. The initial investment required by a franchisee can vary from a few thousand dollars for a home-based franchise to millions of dollars for businesses such as restaurants, retail stores and hotels. Obviously, there is no point in someone considering a franchise that is beyond his or her financial means. This phase filters out a significant number of franchises.
Secondly, there is the type of business. For instance, some people would prefer to travel throughout a territory and would feel restricted being stuck behind a counter in a mall. Some franchisors are better suited to women than men and vice versus.
Another factor that eliminates some franchise opportunities from the list is the requirement of a specific aptitude or skill. Not everyone has the ability or desire to run a technology type of business such as a computer store or IT support, or has a mechanical aptitude.
Other factors to consider are the maturity of the franchise organization (some franchisees prefer to get in on the ground floor; whereas, others prefer to join a mature system), the reputation of the franchisor, and geographical penetration (if all the franchised outlets are in Ontario a franchisee may not wish to be the only unit in British Columbia). There are also demographic considerations as some concepts may work in some areas of the country but not others.
Then there is availability. A number of successful established franchisors might have a limited number of locations still available and hundreds of qualified applications on file. Last but not least is the availability of suitable locations. To the inexperienced eye there may appear to be numerous locations available for the franchise they are interested in; however, that is often an illusion, as the locations may not meet the franchisor’s site selection criteria in all respects. A location may be too big and the landlord is not willing to demise the space to suit the franchisee. Alternatively, it could be too small, have the wrong configuration, may not have sufficient exposure or parking, or inadequate ingress or egress. At times the rent may be too high for the franchisee to make a profit, or the landlord could insist on personal guarantees that the franchisee is unwilling to provide. There may also be restrictive covenants restricting certain types of businesses from the development e.g. there could be a coffee store already operating in the development and the landlord has a restrictive covenant on any other business selling premium coffee drinks.