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Are you considering starting a franchise? You've likely seen the signboard with your name on it, the influx of customers, and the earnings. But wait a minute—there is one crucial step you cannot afford to omit before dedicating your time, money, and passion to any franchise: learning about its past. Why does that matter so much? There are plenty of opportunities in the franchise industry, but there are also a lot of pitfalls. Some brands have flashy advertising but weak cores. Others are a safer option because of their strong past.
Why Does History Matter So Much?
Opening a franchise may be both an exciting and intimidating decision. The prospect of a well-known brand, a tested business plan, and continuous assistance is very alluring. But as with any big investment, doing your research is crucial. And studying the franchise's history in-depth is an important—yet frequently disregarded—aspect of that due diligence.
Also Read: 7 Often Overlooked Things When Choosing Which Franchise to Buy
If you pick the correct brand, starting a franchise may be a thrilling and lucrative endeavor. Even though a lot of franchise businesses have eye-catching brochures and strong sales speeches, it's important to learn more about their history. Knowing a lot about a franchise's past will help you make a confident choice and safeguard your investment.
Consider it like this: you wouldn't invest in stocks without examining their historical performance, or purchase a home without inspecting its foundation. Similar to this, a franchise's past can provide important information about its long-term survival, stability, growth, and moral behavior. Sometimes, a chaotic or troublesome past can be concealed by a dazzling present. Analyzing a franchise in depth will help you spot warning signs, comprehend any difficulties, and decide if it's the best choice for your business endeavors.
How to Research a Franchise's History?
Start with the Fundamentals and Learn the Brand's History
First, examine the franchise's beginnings. The brand was established when? Why and by whom was it initiated? What issue did they seek to resolve?
A brand with decades of experience and steady growth typically has a more dependable structure than one that has just emerged. However, age isn't always a factor; new businesses with creative concepts and careful preparation can occasionally outshine the more established ones.
Study their official website, corporate blogs, and founder interviews. This aids in gaining an understanding of the brand's vision and whether it coincides with your objectives.
Also Read: Should You Start a Franchise After Retirement?
Read the Franchise Disclosure Document (FDD)
An FDD (Franchise Disclosure Document) or something comparable will be present if the franchise is well-established and adheres to accepted business procedures. Your go-to research file is this one.
- What is contained within it?
- Information about the company's executives
- A list of franchisees, both current and past
- Legal issues from the past or present
- Franchise fees, initial expenditures, and continuous payments
- How many stores opened as opposed to how many closed
While many foreign brands provide an FDD, not all franchises in India do. This type of paperwork provides you with an open window into what you're getting into, so always ask for it.
Search for Red Flags—Legal Trouble or Bankruptcy?
Like a detective, use Google. Enter keywords like "scam," "lawsuit," "complaint," or "bankruptcy" alongside the franchise name. One significant legal dispute or negative customer reaction can serve as a warning.
Additionally, review official records (such as those from India's Ministry of Corporate Affairs), consumer court listings, and news stories to see if the franchise has been subject to fines, penalties, or negative publicity.
While no brand is flawless, a trend of legal issues? You should either investigate further or leave at that point.
Talk to Existing and Former Franchisees
If you want the inside scoop, speak with those who have experienced the franchise life.
The majority of reputable franchisors will gladly put you in touch with their franchisees. And it says something if they don't.
Ask questions like:
- How did the onboarding and training go?
- Do they feel satisfied with the help they get?
- Is the company making money?
- Would they make another investment in the same franchise?
Try to get a variety of viewpoints, including those from those who have had difficult or mediocre experiences, in addition to outstanding performers. Additionally, kindly inquire as to why someone left the franchise.
Also Read: 10 Packaging Business Ideas in India
Visit a Few Franchise Locations in Person
Nothing compares to direct experience. Go to a few stores, perhaps as a consumer initially. Take note:
- How orderly and spotless is the area?
- Is the personnel well-trained and amiable?
- At what times of day is the store the busiest?
- Does the store adhere to the rules set forth by the brand?
Additionally, inquire about the owner's or manager's daily activities if you can speak with them. How is the inventory doing? Does the head office provide them with adequate marketing assistance? Are there supply problems?
Understand the Company’s Growth Pattern
Study the franchise's rapid expansion. A business can fail if it grows too quickly without adequate assistance. You want a brand that has robust support networks and expands steadily.
Analyze the number of locations they have opened and closed during the past 3-5 years. It's a serious warning sign if many franchisees shut down shortly after they opened.
Assess Their Financial Stability
Although you don't have to be a finance expert, some fundamental knowledge is helpful. Verify whether the franchise:
- demonstrates consistent revenue growth
- is supported by a parent company or investors.
- reinvests in technology, training, or marketing
- has survived difficult periods such as COVID or slowdowns brought on by inflation.
Keep in mind that even if you're doing everything correctly, a financially unstable brand will find it difficult to support you.
Explore the Brand’s Online and Offline Reputation
What customers think is crucial. Look for reviews on:
- Zomato (food brands only)
- JustDial
- Facebook and Instagram comments
- Quora or Reddit Conversations
Also, look at their online brand management. Is the content on their website current? Do they have active and interesting social media pages? Do they effectively handle concerns from customers?
Also Read: 15 Profitable Rental Business Ideas in India
Assess for Market Fit and Innovation
The world is rapidly changing. Is the franchise staying competitive? Do they make updates to their offerings? Are they updating their collection or menu to reflect current trends, or are they adding tech tools?
Consider whether the franchise is appropriate for your city or area as well. Unless the business strategy has been modified, a cold dessert brand may succeed in Bengaluru or Mumbai but struggle in a cooler rural area.
Wrapping Up
Owning a franchise is a significant choice. You're committing to a long-term partnership rather than only purchasing a brand. Knowing who you're collaborating with is crucial, just as in any other connection. Do a thorough history research on the franchise. Read the fine print, visit stores, ask questions, and follow your gut. The more knowledgeable you are, the more assured you will be when the time comes to start your ideal company.
