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By the point 2023 ends, there’ll doubtless be greater than 800,000 franchises throughout the US, which means buyers have a near-endless array of choices for revenue stemming from probably the most dependable sectors on the planet. And so they’re positively weighing these choices. In a Could 2023 examine, my crew uncovered a sample exhibiting that buyers, no matter age, location, or gender, are more and more contemplating different investments, with 53% of these surveyed actively including alternate options to their portfolios — and throughout the board, their curiosity in enterprise alternate options, like franchising, outweighs crypto and NFTs.
So what are they in search of in a franchisee? It is a query I get on a regular basis. This is the reply: There are eight crucial components that set one of the best franchisees aside in buyers’ eyes.
ROI
This sits on the prime of the checklist for apparent causes, however an investor is wanting far past the variety of prospects who come via your door or the variety of pizzas you promote day-after-day. They’re additionally evaluating what number of workers you will want, what sort of stock you will want available, and if any sourcing necessities may drive up the price. Your buildout value additionally comes into play. Are you shopping for an current franchise location or do that you must transform the house from scratch?
Development
Traders can take a look at this from two angles: the general development of the franchise itself and your particular development as a franchisee. In each circumstances, an investor will ask a number of questions. How speedy is the expansion? Is it as environment friendly as doable? And is it sustainable?
Anticipate massive questions on your development technique too. Is it systematic? What does your marketing strategy appear to be? Your advertising plan? Your monetary projections? What about your massive image? What’s subsequent to your franchise empire after this location?
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Saturation
When you’re attempting to open the city’s one-hundredth burger joint, buyers might draw back just because the market is saturated with related choices. Chances are you’ll assume you could have a strong differentiator, however the group thinks burgers are burgers.
Or, the franchise model itself could also be saturated in your market. If the identical espresso store already has six areas in a ten-mile radius, an investor will doubtless view your development potential as restricted.
Management
Whereas buyers will definitely need to be taught extra about your talents as a frontrunner, they may also dig into the management of the franchisor. Who’s the CEO and govt crew? What’s their expertise on this franchise and the house as a complete? Will they be capable to present strategic steering in good instances and unhealthy?
It really works downstream too. The truth is, I at all times say the very first thing a franchisee wants is a superb normal supervisor. Somebody who can handle and encourage workers, who additionally has a transparent understanding of your business. As your franchise empire expands, you merely haven’t got the time to make sure every location runs like a Swiss watch — however that is no excuse for them to not. It is advisable to excel at discovering high quality leaders after which delegating to them. With out the correct leaders in your crew, you’ll be able to’t count on buyers to have a ton of religion.
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Manageability
That Swiss watch impact must trickle all the best way down. Along with nice leaders (your self included!), buyers need to see easy operations and an worker headcount that is not bloated. Present environment friendly manageability in your current franchises, and also you’re extra prone to get investor financing to your subsequent one.
Sustainability
Take a spin across the ‘internet and you will see every kind of recommendation articles on easy methods to keep away from funding fads. Good buyers do not make selections primarily based on FOMO; they need sustainable investments which can be good for the lengthy haul.
As a lot as all of us dig creativity, essentially the most strong, longest-lasting franchises are the tried and true favorites — like automotive retailers, hair salons, and fast service eating places. It doesn’t matter what darkish clouds the economic system brings, folks will at all times spend cash on these providers. The truth is, in some circumstances, a down economic system truly will increase the demand for them. For instance, shoppers are extra inclined to repair their automotive than purchase a brand new one or deal with themselves to a fast service dinner as an alternative of a elaborate restaurant.
Aggressive Benefit
Your aggressive benefit can are available many types, and buyers shall be interested in all of them earlier than handing over any cash. Perhaps your franchise model has a differentiator that the competitors really cannot replicate. Perhaps the model is so recognizable that it creates a pure benefit (golden arches anybody?). Perhaps its mission actually resonates with shoppers, like giving again to the group. Perhaps your subsequent franchise simply has an superior location that is a pure site visitors magnet, like the primary fuel station everybody sees after they’re getting off on the busiest freeway exit on the town or the sports activities bar throughout the road from the native crew’s stadium.
Resilience
How properly do you and your crew pivot? Is your working mannequin constructed with resilience in thoughts? Whether or not it is a change within the economic system, a change in buyer demand, or a change nobody noticed coming (hi there, pandemic!), resilient franchises are way more interesting to buyers. They need to know you are prepared to leap in with Plan B, C, or D at a second’s discover.
Do not simply give attention to the large fish
Positive, an investor who’s going to spend tens of 1000’s of {dollars} might have extra questions than somebody who is simply spending a thousand {dollars} on a crowdfunding platform, however cash is cash. Everybody desires to get essentially the most out of theirs. Do not assume that smaller buyers equal much less due diligence. And fairly actually, if you cannot tick all of those bins, maybe that you must rethink your potential franchise.
There isn’t a scarcity of franchising alternatives. Be certain that every one — whether or not it is your second or your twentieth — is the proper match for you and buyers of all sizes.