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Purchasing a Franchise? Check Out the Competition First

Posted: 5/18/2016 08:30 AM by Interim Franchise

When making the decision to enter into a franchise agreement, consider looking at the competition.

In almost every instance, there will be competitors for the concept you are reviewing.  You may think that there is little information on your competitors but with some ingenuity, you can uncover facts and make observations that will help in your decision
making process. Think about it.  Your prospective customer is finding your product or service, so it is your responsibility to understand all the companies they will be looking at.

To fully appreciate the completive landscape, you should consider the following steps:

  • List all your competitors and know their locations. Draw or create a map that shows the three and ten-mile radius of your proposed franchise.  This will give you an idea as to what to expect when you enter the market.
  • Assess your competitor’s strengths and weaknesses. Include the products or services they sell, the pricing structure, their marketing message, website, and reputation.
  • Shopping your competition is important. Visit the competitor websites and listen to their sales pitch. Ask for a price list and marketing materials. What are they emphasizing on their site? What do they say about themselves? What conclusions can you
    draw? Their websites are a valuable source of company information. No internet site? That’s useful information as well.
  • Do a thorough search of the Internet, using various search engines. In addition to the website, you want to see where your competition appears. Maybe they don’t have a site, but they’re listed on other sites or have a store in an online mall. The
    web reveals an abundance of information about your competitor and needs to be a part of your analysis.
  • If applicable, count the number of cars in the parking lot. Also, take note of the building and see if it is a safe and clean environment.  View the customers coming and going. Note their age, ethnicity, appearance and reactions,
  • If possible, talk to your competitor’s customers. Ask them why they choose to purchase goods or use their services. You need to go online as well.  Look at their reviews and if possible, read and participate in their business blogs.
  • Do an audit of the competitor’s advertising.  Look at local broadcast and print ads. Call up the sales representatives of the local media and ask for a price list and try and find out what your competitors are spending. You may not be able to get
    this information but if the media wants your business they may be forthcoming with information regarding your competitor’s campaigns.

Credit reports are available through Dun and Bradstreet and only cost about $100. These reports give you an idea of the financial viability of the company.  If you can secure a Franchise Disclosure Document (FDD) you should do so as well, as this will
provide a wealth of information. Everyone considering the purchase of a franchise needs to analyze the competition carefully. Consider it an opportunity to look closely at your market and have a much better understanding of threats and opportunities.
Having a thorough understanding of your competitors will help you make your final decision regarding the proposed franchise in addition to having a better understanding of  how you can position yourself to become a market leader.

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