Franchise Market Research

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Franchise market research article

Originally posted on 09/10/2017. Updated on 14/06/2019.

According to the British Franchise Association, the franchise industry is booming. It has increased in size by 14 percent since 2015 to employ 710,000 people and comprise 48,600 units. Franchising is an attractive prospect for prospective business owners, as the backing of a reputable brand and stability of a proven business model increases a business likelihood of survival and often boosts profitability in the long term. In fact, 60 percent of franchise units currently turn over more than £250,000. Franchises operate in a huge variety of business areas, from the management, hotel and personal care sectors to restaurants and shops.

Becoming a franchisee can be as simple as choosing a franchise and going for it. However, if you want to reduce the risk of failure, it is worth doing your homework before you make your final decision.

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Homework for Franchisees

Researching different franchises ought to be the first step any potential candidate takes. Point Franchise is designed specifically for franchisees to examine and dissect franchise opportunities and decide which are best for them. You should also take the time to research the industry to which your chosen franchise belongs. Make sure it has a bright future and that there is space in the local market, should you choose to set up shop. Understanding the industry will serve you well as you launch and run your business too.

Ask the right questions to get the right answers

The term market research can sound intimidating, but it is vital if you are to feel confident about your business future. The purpose of researching your chosen sector is to determine whether there is room in the market for a franchise to establish itself and blossom. It will serve you well to know which questions to ask in order to create a clear picture of where your franchise might stand in the marketplace. While some people say you can never do too much research, the following key questions will give you a good indication of whether a franchise is a viable option:

  • Is there room in your chosen sector for another franchise or has it already reached saturation point?
  • Is there demand for what youre offering or has that market reached a plateau or slumped?
  • How many businesses and franchises already offer the services or products that you intend to?
  • How much will it cost to buy or rent premises for this franchise?
  • How easy is it to supply your business with the stock you need?

Secondary Market Research

The next step is to research the market and determine how your business might fit in. At this stage, there are three options that can provide the information you need:

Use the services of a market research company

Market research companies specialise in collecting data to determine whether a product or service matches the needs of its potential consumer base. In addition to identifying what your customers want, a good market research company can also give you valuable insight into economic shifts, customer demographics, market trends and the spending habits of your target market.

Undertake your own market research

This might include contacting your local Chamber of Commerce, which can provide you with an overview of local businesses or taking a look at the Trade Directory in your local library. There are many avenues available to you if you wish to find out more about a certain market or local competition.

Research data available online

Theres plenty of market research data available online but knowing where to start can be a little daunting. The Office for National Statistics can give you information on your chosen market, detailing factors such as demographics and other consumer data. However, youll also find that companies such as Mintel, Equiniti and Data Monitor sell the sort of information that youre after. While this data can come with a hefty price tag, it can also offer a level of insight that your own market research cant achieve.

For the best results, use each option and compare the information you uncover. Consistent data will provide you with the insight you need to make an educated and informed decision.

Time to Swot Up!

Once youve identified your potential franchises place in the market and analysed the market itself, its time to look at the business in greater detail. In the franchise industry, this is known as a SWOT analysis, an acronym that stands for:

Strengths What factors make this franchise a good investment? Using the market research youve compiled, try to boil it down to a series of bullet points. You could probably wax lyrical about what a franchise could offer you, but reducing it to a series of clear points will help you see things more clearly.

Weaknesses As youre not a franchisee just yet, being open and honest about a franchises flaws will help you decide whether its for you. Again, using the information youve gained from your market research, weigh these up against the franchises strengths.

Opportunities The market research youve done should give you a reasonable idea of what opportunities are available for the franchise. This is probably the most important part of the review, as you should be considering the marketplaces potential and whether it is worth considering in the first place.

Threats Any business, franchise or otherwise, has to fend off threats, which can come in a variety of guises. Consider any factors that might have an impact on your goals, from competitors and the location of premises to sector-specific legislation and bank charges. The more detail you can invest in this section of the review, the greater your chances of growing your franchise over time.

Market research is one of the most vital aspects of becoming a franchisee but, with all the excitement of a potential opportunity, it is often ignored. Taking the time to research the franchise and its possible market before you get involved can help to ensure the success and growth of your investment.

What next?

The need for market research doesnt evaporate once youve chosen and set up your business; it is always a handy tool to increase the profitability and efficiency of your business. Once you have established your position in the market and developed your product offering, there are more options available to you, should you wish to conduct market research. Here are some of the most useful:

Observation: This involves watching potential clients or customers to see how they use and react to products or services. If you aim to open a shop, you could quietly observe customers in a rival store or hire a mystery shopper to do this for you; notice how customers navigate the store, what they buy and how much they spend. If you plan to have a website or run an online business, you could use eye-tracking technology to find out how willing participants would find their way around the site and where their focus is drawn to.

Surveys: By sending out surveys to potential customers, you can discover the answers to any specific questions you may have. Alternatively, create a check-box survey to allow participants to rate their response on a spectrum. You could send surveys via email, conduct them by telephone or even invite potential customers to answer it in person. Just make sure that you survey a broad range of demographics so that you get responses that accurately reflect the market.

Interviews: Conduct a one-to-one discussion about the business and its products or services. You could compile a list of specific questions to ask or just let the conversation flow freely. Interviews can be useful to get upfront feedback, but shouldnt be intimidating or stressful. You could thank the participant by offering money, vouchers or a gift.

Focus groups: Invite a group of 8-12 participants to discuss your products or services. You could focus on a specific social group, from relatively vague demographics such as local university students, to fairly specific ones, like tennis players in Bristol over the age of 50. A representative from your business should lead the discussion, asking predetermined questions or finding out more about a specific subject raised by a participant. However, the business representatives should not get too involved in the discussion. Instead, they should allow them to have a natural and honest conversation about the business offering.

Field experiments and trials: If you would like to test how effective your products, services or advertising efforts are, you could use a trial. Often, this involves giving two products that are slightly adapted or two different web pages to the trial participants and finding out which result in more sales.

Of course, the suitability of each option for a business will vary depending on the business market research budget and the type of products or services it provides. But, by using one of these methods or mixing and matching approaches, you can ensure that your business has a place in the market in the long run.

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