Busy Does Not Equal Profitable

My parents used to have a favorite watering hole and feed bag that served the best barbecue in the south along with beer brewed on the premises. What can I say? My pop likes his beer and 'cue.

Imagine my parents dismay when they approached the place one Saturday evening to find the doors shuttered and the lights off. "I don't understand it," my mother bemused, "the place was always so busy, how could they go out of business?"

She was partly right. The place was typically hopping on weekends, and on the occasions me and my misses accompanied them we had to wait a spell for a table. But, busy does not equal profitable. All busy means is that an establishment has a popular product that was effectively marketed to the surrounding area. That doesn't mean they are doing the most basic of economic functions -- buying low and selling high.

When purchasing a franchise, there's a good amount of research you should do before betting away your retirement and plunking down the balance of your 401K. One of the simplest things to do is visit a few of the franchise locations within driving distance and see how busy they are. It seems logical. But all this will tell you is how popular the product is, not how profitable you will be.

You still have to look into distribution agreements, leases, labor costs, franchise fees, etc. You know, the meat and potatoes of running a business. Otherwise you may end up like these guys. One of whom fell victim to the old "place is jumping" research.

And don't worry about my dad, he's already found a new place to gas up on the weekends. Instead of barbecue it's crab legs, and the microbrewery on the premises puts the other one to shame. He's a resilient man, my dad.

Franchise "Creature Feature" Writer

Niche vs Broad

A common mistake made by potential franchisees in their determination process is that a general, more broad franchise is the way to go. No one is quite sure why this route is so well traveled. Perhaps their quest for great wealth has clouded their vision. Nevertheless, the niche franchise road could be a smoother ride.

Don’t get me wrong. There are still plenty of tricky bridges to cross when choosing a more specific audience. Less name brand appeal is one obstacle, for example. But on the flip side there is also less competition. Big name franchises appeal to the masses, yes. But by finding a franchise with a specific market you will ultimately shrink both your audience and your competition simultaneously.

With a more specific audience, advertising and marketing your franchise will be that much easier. You can spend more time promoting yourself instead of desperately trying to showcase how you are better than the big guys. As your core audience becomes more enticed, word of mouth will spread, and your business will grow.

And of course there is the expertise factor. Chew on this: as a consumer would you rather approach a person who knows everything about one topic or someone who has more extensive broad knowledge? Probably the former; you wouldn’t go to your local walk in clinic for a painful tooth ache just like you wouldn’t go to a widespread fast food restaurant for your anniversary dinner.