How to analyse your market before you purchase a franchise

Before buying a franchise it’s highly important to research the market; this can be a laborious process, but it’s a worthwhile endeavour.

Market analysis is one of the most important parts of any start-up. When investing in a franchise, the franchisor may help you to choose a location but it can be difficult to make certain that there will be a demand for your product or service.

Before buying a franchise it’s highly important to research the market; this can be a laborious process and there are plenty of questions to ask but it’s a worthwhile endeavour.

Market analysis provides a snapshot view of your customers: who they are, their numbers and the potential for growth. It also enables you to ensure there isn't an excess of competition and, if relevant, whether you will get sufficient footfall.

Good market research is a sure-fire way to grow a successful franchise.

Target market

It’s extremely important to gain a clear understanding of who your target market is. Many entrepreneurs make the mistake of trying to target everyone, ignoring the fact that their business won’t appeal to all.

By narrowing down your criteria, you can hone in on your target demographic, avoiding the ‘one size fits all’ approach.

Narrow your market

One of the best ways to improve your franchise marketing is to narrow your profile. If your target audience comprises of a lot of people, then you’ll need to send out a generalised message to attract them. In turn, this means you will have to advertise in generic franchise publications where you’ll likely be competing with thousands of other opportunities.

A bit of healthy competition is all part of running a franchise, however, it’s helpful for franchisees to narrow the scope and the focus of their message and advertise in areas that are less saturated to get a better result.

Market segmentation

Once you have established and narrowed your potential customer base you will need to define them to get the best picture. Divide your market into different segments by looking at them in geographic, demographic and psychographic terms.

Reaching your potential customers with a targeted message at the right time is a key part of gaining and maintaining your sales

Take into account where they live, their age, income, race, gender, marital status, household income, level of education, lifestyle, beliefs and any behaviours that could affect their purchasing patterns.

Segmentation allows you to target your audiences with personalised and specific responses catering to more individualised consumer needs.

It also allows you to tailor your marketing efforts and set price patterns within each of the different market segments, and subsequently establish your customer’s interests and buying habits. This will put you in a position to explain to them why your business meets their needs above the other competitors.

Determine size and growth potential

Being able to quantify your market and create a market forecast is key. These forecasts start with the number of potential purchasers in each segment and making a projection for the change over the next three to five years.

You will also need to consider your potential for market growth; are the number of people in this segment on the rise? Think about things like:

• How many people are retiring or leaving work?

• Has their purchasing behaviour changed in any way i.e. are people still eating out, spending money on leisure?

• How much are people spending per annum?

Through making projections, you can present your potential pricing structure and gross margin, establishing the difference between your cost and the sales price.

At this point, it’s important to be realistic yet optimistic. Optimistic projections serve not only as a guide, they can also be motivational.

Also remember to keep in mind that the demand may change over time. Keep updating, and consider what protective measures you could implement to stop your franchise from being affected by external factors.

Examine your competitors

In an ideal world you would be trying to access a market with no competitors, where their needs aren’t already being met – but often this isn’t a realistic vision.

Getting to know your competitors will give you an advantage; it’s always great to know what you’re up against. So who are they? How will they impact you? And what can you offer that they can’t?

Consider the size of their market, how similar their product or service is to yours, their growth rate and their strengths and weaknesses.

Their weaknesses can be your strengths - use their pitfalls to excel. However, it’s also important to establish your barriers and anticipate what your potential problems could be. Examine your own weak spots as well as your competitors and make sure you’re honest with yourself.

Understand your competitors and what they are selling; the best way to do this is to try out their products or services. Becoming a part of their market and customer base is the easiest way to find out first-hand what you are up against.

Get informed

There are plenty of resources to help business owners conduct market analysis. However these resources will differ depending on the type of business:

Trade association: trade associations often hold data collected from their members. This information could help you to gain a good insight into your particular market.

Official figures: the Office for National Statistics (ONS) is government run database and a good place to start as it provides free data.

Online research: online research is free and readily available, however do make sure that it is up to date and from a credible source. Trade Publications often have free and unrestricted access.

Pay for research: there are also websites that you can pay for data and industry statistics.  

It doesn’t end there

Once you’ve done all your initial research and bought your franchise, continue to research your market. This will enable you to keep targeting your existing customers and secure your place ahead of the competition.



Melanie Luff

About the author

Mel wrote for all titles in the Dynamis stable including, and as well as other global industry publications.