The success of an entrepreneurial project depends on the profitability of a concept.
Yet this information is not always the easiest to find, as franchisors are sometimes cautious (and rightly so) when it comes to communicating their financial prospects.
How can you be sure thata concept will generate profits?
Where can I find this valuable information?
What clues should I look for when opening a franchise?
Which sectors are the most profitable?
Here are six steps to take to assess whether a franchise concept is profitable.
Step 1: Ask the franchisor for information
Before embarking on your survey, check with the franchisor. He’ll be able to give you factual information about his own experience with his pilot unit. He’ll also tell you the number of outlets, the number of multi-franchisees, sales figures and the average cost structure. He’ll also tell you the total investment and personal contribution required for the project, as well as the amount of the entry fee.
Your (future) franchise network may give you a great deal of information even before signing the pre-contractual information document (DIP) and franchise agreement, but will naturally be more inclined to share more data once the DIP has been signed, as it includes a confidentiality undertaking.
Step 2: Examine franchisees’ accounting data
Obtain the Siren numbers of the legal structures of the franchisees in your target network to identify available accounting data.
In some cases, it is possible to find balance sheets, shareholder information, capital increases or official procedures (sauvegarde, redressement, etc.) on Societe.com, Infogreffe or Papers.fr.
Step 3: Conducting the field survey
Meet our franchisees and take the time to interview them without taboos. How much do you earn? How long did it take you to earn your first salary ?
Take the opportunity to appreciate the atmosphere between franchisees and the head of the network.
Play the role of mystery shopper to get a feel for the company’s service and overall operation.
It’s an essential exercise that will help you project your future.
Step 4: On-site flow analysis (for B2C outlets)
Set up shop for a day in front of one of our stores to analyze the store’s traffic flow.
How many people pass through the door?
How long do they stay inside?
What’s the customer mix?
What is the buying behavior of customers?
After one or more days of observation, you’ll be able to form your own idea of the franchisee’s business.
Don’t hesitate to repeat the experience at several locations.
Step 5: Ask the competition
Interviewing franchisees from a competitor brand gives you a better idea of the sector: is it buoyant or not?
What challenges does it face?
If all franchisees in the same market suffer from the same financial difficulties, it may not be the franchisor who is to blame, but rather the promises of the business sector.
For the same reasons, don’t hesitate to get information from competing franchisors and compare it with that of your favorite brand.
Step 6: Get help from a certified accountant
Get a chartered accountant to help you draw up your business plan.
Rely on your franchisor to guide you and verify your assumptions.
Think of him or her as a partner with the same interests as you: your success.
If you need a loan, your future banker will be more reassured if you are accompanied by a chartered accountant.
The more your financier senses your degree of preparation, the more he will defend your colors with his risk committee.
