A recent article in Entrepreneur.com gave those who are evaluating franchise opportunities some good advice. They advised prospective franchisees to look for a franchise with the “long-term viability associated with vibrant growth, but also one that’s not growing too fast to manage the issues associated with this growth.”
Some key indicators the article advises prospects to consider are:
The number of new franchisees. This number shows you how many new franchisees are being added to the system each year.
The percentage of new franchisees to the whole system. If a system has 10 new franchisees out of a total of 200, they’re going to have far more support capacity than a system that has 10 new franchisees out of a total of 20. As a good rule of thumb, new franchisees would represent somewhere between 10 to 35 percent of total franchisees.
The number of units. The advantage of these numbers is that they are usually easily discernible in the FDD that the franchisor provides to you.
Look for the total number of new unit openings in the system, for example, in the past year. Then determine how many were franchisee first units vs. multiple units being opened by an experienced franchisee. Multiple units suggest a fairly sound franchise system (or the existing franchisees wouldn’t be opening more units). If you find out very few new units are being opened or even that the total number of units is actually decreasing, consider it a red flag.
Read the full article here: http://www.entrepreneur.com/article/75362#