Franchise Feasibly study

Maybe you have heard at a seminar, or in conversation with a consultant that you need to do a franchise feasibility study. Maybe you read our article “How Do I Franchise My Business?” However you ended up at this article, you are probably wondering what is a franchise feasibility study and how do you do one.

What is a Franchise Feasibility Study

A Franchise Feasibility Study is exactly what it sounds like; a study of the feasibility, or practicability, of franchising a specific model. A franchise feasibility study looks at three main segments; the profitability, if the business is clonable, and the size, saturation, and longevity of the core market.

Profitability

You would think that profitability is straight forward; is my business profitable or isn’t it. Unfortunately, its not that simple. A franchise feasibility study doesn’t just look at the profitability of your business; it also looks at the profitability of a theoretical franchisees business. Additional expenses, such as royalties and management staff, and likely a more expensive, uniform buildout for a bricks-and-mortar franchise, have to be removed from the profit. Additionally, things that you may be backing out of your profit, such as personal vehicle expenses, loan repayments, and owner draw, need to be figured back in.

Clone-ability

Just because you have a business that is extremely profitable doesn’t mean it is franchiseable. The next thing that a franchise feasibility study needs to look for is the presence of any unique factors that a franchisee would not be able to easily replicate. A store near the Grand Canyon selling Canyon souvenirs may be extremely profitable, for example, but the same model would most likely not work in Chicago. Unique location, a unique ability that the owner or a specific key employee has, or a geographically-limited appeal are all concerns during this part of the feasibility study.

Market

Offering just the right mix of product with just the right flare in just the right neighborhood can make for a very successful business, but may not make for a successful franchise concept. A franchise feasibility study will evaluate if the market the business is in is extremely niche, if it is overly saturated by either franchised concepts or corporate competitors, or if it is based on a fad. Any of these facts would raise a red flag in the feasibility of the business model as a franchise.

The franchise feasibility study is often overlooked. It is a very necessary part of answering the question how do I franchise my business, however. Before you figure out how to franchise your business, you need to know if you should franchise your business. To learn more about franchise feasibility studies and how to franchise a business, contact us today!