Choosing the Right Industry for Your Franchise

Some aspects you may want to consider

Author: Jason Rager

Organization: Franchise Analyzer

About the Author:

Jason Rager is the author of: The Franchise Insider's Guide, the most comprehensive franchise resource available, and No Money Down Franchising, the only system developed to help you buy a franchise business for little or no money down. Mr. Rager has over seven years of franchising experience owning six different franchise brands in three industries. He is also Founder and President of Franchise Analyzer a software company that develops software solutions for the franchise industry.

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Choosing the industry for your franchise business is usually a very personal decision for most people but today I want to highlight some other aspects that can affect which industry you go into and ultimately your success as a franchise business owner.

First and foremost, you should choose an industry that you will enjoy working in day-in and day-out. You should plan on spending a significant amount of time running your business until it is scaled up and you have solid personnel and procedures in place to grow your business. Therefore enjoying your products and/or services, working with your customers, and working with the vendors within your industry will be highly advantageous. Additionally, having industry-specific knowledge can be an excellent advantage you will have over your competitors. You might also personally know some people within your industry and you can leverage those contacts to turn them into profit.

A second determinant that is often overlooked is your financial position and credit history. Since the Great Recession, obtaining financing for a capital-intensive business such as a bar or a restaurant has become a significant challenge for many people. As a result, many people have been choosing franchises that are service-related and that often require little more than a laptop, fax machine, and telephone. Further, many people that have had issues with taking on too much debt may choose a leaner, less capital intensive business because they want to sleep soundly at night and not worry should the economy take a turn for the worse.

A third factor that many people don't consider when choosing an industry to open their franchise business in is choosing an industry with positive long term growth trends. As a general rule of thumb, you want to avoid businesses or industries that you believe may be going into decline. For example, if you were in the business of selling buggy whips in the early 1900s, your business's days were numbered due to the invention of the modern automobile. So you should generally do some research to learn where your industry of choice is going. Then you can make an educated prediction about the direction of your industry and business.

Finally, you should consider your business's expansion plan and lay out where you would like to take your business in terms of your career-arc. After all if you are successful in starting and growing your franchise business, then you will most likely expand by either opening more locations or creating businesses that provide support services within the same industry. Additionally, opportunities will arise that you cannot foresee right now and chances are they will be in the same industry that your franchise business is in.

By considering these factors when choosing the right industry to go into, you begin thinking about your franchise business in a different context. Ultimately, being in a growth industry can be a much enjoyed wind at your back while you work to grow and maximize the profitability of your business. Also weighing the benefits of running a less-capital intensive business may help you choose a line of work that is aligned with your personal risk profile and investment objectives.

Happy New Year!