A franchise that works in one city can fail in another. The key is demand, competition, and location-specific trends.
Before you commit, ask yourself:
- Are enough people looking for this product or service?
- Can they afford to pay for it?
- Is the market growing or shrinking?
- How much competition already exists?
Skipping this step means walking into an uphill battle.
Demographics Shape Business Success
You’re not selling to a spreadsheet. You’re selling to people. If the right people aren’t in your area, the business won’t work.
Example: Running Culture and Fitness Trends
- Running has exploded among millennials and Gen Zs. Cities with parks, running trails, and active communities create strong demand for athletic gear, smoothie bars, and recovery centers.
- A high-end running shoe store will do well where people train for marathons. It won’t do much in a town where running isn’t part of the culture.
✔ Tangible Tip: Check local event calendars. Look for marathons, cycling races, or fitness expos. If they don’t exist, demand might be weak.
Example: Remote Work and Changing Buying Habits
- Work-from-home setups have changed where people spend money.
- Office district lunch spots are struggling. Suburban cafes and coworking spaces are booming.
- A franchise that relies on office workers will struggle if most companies in the area have gone remote.
✔ Tangible Tip: Check office occupancy rates. A half-empty downtown means businesses relying on foot traffic will suffer.
How to Know if a Market Has Potential
1. Demand: Are People Looking for This Business?
✔ Example: A high-end pet grooming business thrives in neighborhoods where people treat pets like family. It won’t work in a market where owners choose basic services over premium care.
✔ Tangible Tip: Search for similar businesses in your area. Read customer reviews. Are people complaining about wait times or poor service? That’s a gap you can fill.
2. Competition: Is the Market Already Too Crowded?
✔ Example: A burger franchise opening near five other burger chains will fight an uphill battle. A Mexican fast-casual restaurant in the same area might dominate because there’s no strong competition.
✔ Tangible Tip: Visit competitors at different times of the day. Are they packed, or are they empty? A strong competitor with loyal customers makes it harder to break in.
3. Location: Will Customers Actually Come?
✔ Example: A luxury hair salon in a busy shopping district attracts walk-in customers. A high-end bakery in a low-traffic location might struggle, no matter how good it is.
✔ Tangible Tip: Spend a full day at potential locations. Count how many people walk by, what they do, and if they fit your target customer.
4. Consumer Spending Power: Can They Afford This Business?
✔ Example: A boutique fitness studio charging premium rates will fail in a neighborhood where people prioritize budget-friendly gyms. It will thrive in a high-income area where people expect high-end services.
✔ Tangible Tip: Look up median income levels in your area. If your business depends on premium pricing, the local economy has to support it.
5. Industry Growth: Is This Business Expanding or Dying?
✔ Example: Home services like plumbing, electrical work, and restoration are growing as homes age and people invest in renovations. Video rental stores were once everywhere. Now they don’t exist.
✔ Tangible Tip: Read industry reports. See what’s growing and what’s fading before investing.
Key Terms Every Franchisee Needs to Know
✔ Market Share – How much of the total industry revenue a brand captures. A franchise with shrinking market share may be losing relevance.
✔ Break-even Point – The moment revenue covers expenses. A franchise with high costs and slow customer growth will take longer to become profitable.
✔ Customer Lifetime Value (CLV) – The total amount a customer spends over time. Subscription-based businesses usually have higher CLV than one-time purchase models.
✔ Barriers to Entry – The difficulty level for competitors to enter the market. If it’s too easy to start a similar business, expect constant price competition.
How to Choose a Franchise That Matches Your Market
✔ Check local demographics. Make sure the customer base exists.
✔ Analyze competition. Too many similar businesses will make it harder to gain traction.
✔ Look at customer spending habits. Are people willing to pay for what you’re selling?
✔ Evaluate location feasibility. If customers don’t pass by regularly, sales will suffer.
✔ Follow industry trends. Growing industries have more long-term potential.
Franchise success doesn’t come from choosing the biggest brand. It comes from selecting a business that fits the right market.
Before you invest, check if the demand exists.
Unsure if your market is the right fit? Book a free introductory call to assess your franchise options and make an informed decision.