How to Conduct a Franchise Market Analysis in 5 Steps

While many business owners found success going into franchising, it isn’t as easy as some people would have you believe. To gain success in any business, in which franchising is no exception, you have to perform a market analysis. To make it easier on you, here are five efficient steps you need to take to conduct a franchise market analysis.

What is a Franchise Market Analysis?

To help you understand the market demand for your franchise concept, you need to do a franchise market analysis. It is a research process that business owners undertake to learn about your competition landscape, the overall economic climate, and many other factors. Below are the key things you need to consider to conduct a practical franchise market analysis:

• Your target market – this is your ideal customer. You need to know who they are, where they live, their pain points, and many other details.
• Your franchise industry – you need to determine the size and growth of your franchise industry. You must also understand the trends that can affect your business and the many franchise types available.
• The economic climate – know the economic environment in which area you will be opening your franchise and how it can affect you.
• Your competition – you need to identify your competition, learn about their strength and weaknesses, and learn how to position your franchise and compete effectively.

Why Do You Need to Perform a Franchise Market Analysis?

A franchise market analysis is crucial because it will help you understand the demand for the franchise concept you’re considering. Gathering information about a business is essential to help you make informed decisions about whether to franchise or not and the type of franchise you want to enter. In short, you’re increasing your chances of success by performing a market analysis before getting into a franchise.

5 Steps to an Efficient Franchise Market Analysis

And as promised, here are five steps you need to follow to conduct an efficient franchise market analysis:

1. Define Your Key Players

The first step to an effective franchise market analysis is to identify the following key players in your target market:

• Your customers – identify who your paying customers are as well as your competitors. Know who has paid, used the trial (if applicable), or availed of the free plan.
• Your competitors – check out the companies that offer the same product or service as you do and learn what they do, how they do it, and other details that can help you get a head’s up.
• Influencers – it’s also helpful to identify influencers within your niche who are partners, thought leaders, and competitors that can impact the market and your customers.

The more you know about these key players, the better equipped you’ll be in your product development, marketing strategy plans, and almost every aspect of your franchise. 

2. Research the Franchise Industry

Once you know your target market and competitors, you need to understand the franchise industry in general. You have to see the size and growth of the industry, the significant trends impacting it, and the various types of franchises available. This is especially helpful if you’re still figuring out which franchise to get into.

Knowing the franchise industry helps you narrow down your choices and find the most suitable for you. Here are a few ways to do your research:

• Look into industry reports – these reports will provide extensive information about the franchise industry. You can check out government websites, trade associations, consulting firms, and even online databases to get them.
• Stay up-to-date with trade publications – trade publications can offer the latest news and trends in the industry you’re considering.
• Check government data – the government collects data from the franchise industry, making it a great resource for information.
• Leverage online tools – websites and tools such as FranchiseHow are excellent resources to find news and information on the franchise industry.
• Interviews with franchise owners – speak with current and past franchisees to get hands-on experience managing a franchise business. They are equipped with knowledge that you can’t find anywhere else.

3. Analyze the Economic Market

While understanding your audience can do wonders for your franchise, it wouldn’t be complete without knowing the economic climate. Doing so will help you make informed decisions about many aspects of your franchise, such as location, opening date, and financing.

Here are a few things you need to know:

• Overall economic growth
• Disposable income
• Unemployment rate
• Inflation rate
• Government compliance

4. Develop Your Market Plan

A marketing plan is an outline of your strategies for entering and competing in the market. It is a crucial part of handling business as it gets you in front of the people who will buy and patronize your brand. This plan should include your goals and objectives for your franchise and your marketing and sales strategies.

Here are some pointers you can consider when doing a franchise market analysis:

• Leverage all available sources of information, such as those mentioned above.
• Interview potential customers and industry experts.
• Visit a few possible franchise locations.
• Get the help of a professional market research firm.

5. Consider Pricing and Forecasting

The ultimate goal of a franchise market analysis is to determine if yours can compete in the industry, market, and location you are eyeing. After gathering data from your research and competitive analysis, use them to learn about product pricing. It should cover all your expenses and still be competitive enough to get you a market share. This is what will ensure your franchise’s longevity.

Furthermore, you need to identify your USP (unique selling proposition) should you find yourself pricing higher than your competition to stay in business. If you find that you cannot compete on pricing, the workaround to this is to add more value to your offerings. 

This will make your customers choose you over the others and be willing to pay the higher price. There are plenty of ways to do this, such as offering discounts or free shipping, and many others.