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Franchise Research – Establishing Market Potential

Ask yourself a series of questions along the following lines, and persevere until you have formulated realistic answers:

Question – Is the market for this product/service:

  • in its infancy?
  • expanding rapidly?
  • growing slowly?
  • static or in decline?

Note:  The number of advertisements you see for the product or service now compared to a couple of years ago may give you a good indication of the general state of the market.

Question – Does the product/service have special features which are likely to appeal to its target market and help to sell it? In other words, does it warrant a premium price?

Notes: In order to make money for the franchisee and franchisor, the product should have tangible advantages over those offered by its competitors. It may be difficult to maintain premium prices if the product or service could be easily copied by others.

Questions –  Who are the potential competitors in this market? How competitive would the franchisor’s product or service be in relation to them?

Notes:  Do competitors have any technical or price advantages?  As a member of the network you are investigating, would you be able to improve on the service they offer? What is their level of advertising? If there are no competitors, ask yourself why this is the case. Perhaps the market potential is too small?

Question – Having looked at the general market for your product, the time has now come to investigate the local market in which you will be operating.

Notes:  Does the local market have the same characteristics as the market in general? Is the product particularly suitable for your area?  How dependent is success of the business on particular lifestyles or levels of income? Consider market segmentation!