Selecting a franchise involves a unique blend of considerations. On the one hand, you want a well-established brand with a proven track record of helping franchisees grow successful independent businesses. On the other, you need to make sure your franchise is relevant by today’s standards, and you need to know that your franchisor isn’t going to fall behind the times. With this in mind, is an “emerging” franchise a good investment? In this article, franchise attorney Jeffrey M. Goldstein shares his thoughts:
Should You Buy an Emerging Franchise?
Buying an emerging franchise can be a good investment—under the right circumstances. While well-established brands certainly still have their place in the market (and won’t be going anywhere any time soon), many of today’s consumers are less tied to these brands than they used to be. Many of today’s consumers are more interested in finding what’s next, exploring new concepts and building loyalty with up-and-coming brands.
Of course, this can work both ways. While this type of consumer sentiment might drive traffic to an emerging franchise concept initially, this traffic could also be short-lived. If even newer brands pop up offering even newer concepts, what was once an emerging franchise could suddenly become an outdated fad.
With this in mind, when evaluating an up-and-coming franchise system, it is important to thoroughly evaluate the entire package. This means seeking out the answers to questions such as:
- What is the franchisor’s long-term growth strategy? Will it be devoting its effort and resources to your geographic area?
- Does the franchisor have federally-registered trademarks? Or, is there a chance that it will need to rebrand the entire concept due to conflicting trademark rights?
- Does the franchisor have a sound operating system? When updates are necessary, will you be able to implement them cost-effectively?
- Is the franchise system truly emerging? Or, is the franchisor seeking to cash in on a current trend, fad or craze?
- What are your rights under the franchise agreement if your franchise ultimately proves unsuccessful? Do you have legal remedies against your franchisor in the event that your franchise fails due to shortcomings within the franchise system?
Evaluating Up-and-Coming Franchise Opportunities
Answering these questions (among the many other questions you need to answer before buying a franchise) involves several steps. You should schedule a time to visit the franchisor’s headquarters, you should speak with several current and former franchisees, and you should carefully review the franchisor’s Franchise Disclosure Document (FDD) and franchise agreement. You should hire a franchise attorney to conduct a franchise business review as well, as an experienced attorney will be able to provide deep insights based on decades of experience representing prospective franchisees.
Speak with National Franchise Attorney Jeffrey M. Goldstein
If you are considering an emerging franchise, we strongly encourage you to contact us for more information. We offer four tiers of fixed-fee franchise business review programs, and franchise attorney Jeffrey M. Goldstein has more than 30 years of experience in the industry. To learn more, call 202-293-3947 or request a free initial consultation online today.