How to start a franchise: conduct market research

DNS Accountants

How to start a franchise: conduct market research

If you are looking to start a franchise business soon, it is important to first analyse each of the opportunities available to you. You need to understand what your target market or potential customers want, how they will interact with your product or service, and how successful your new venture may be in the long term. Carrying out market research is also an essential part of creating a business plan, which is vital to secure funding if you need it to start your new franchise business. In this article, we look at five key elements of market research you need to consider to fully understand whether a franchise opportunity is right for you.

Find your target market

Many new business owners make the mistake of thinking that everyone is their target market, but this makes many other areas of business much more difficult. With no specific audience in mind, you risk failing to connect with anyone, by having a bland business. Identifying a smaller target market also allows you to compete with bigger businesses, as you can solve problems specific to your niche. It is more difficult for larger businesses to come up with niche offering and solutions whilst still having mass appeal.

Identifying your target market not only allows you to tailor your offering but your message, tone of voice and communications too.

Work out how you will appeal to your target market

After you have determined who your potential customers are, you will need to understand them a little better. You will be looking to divide your overall audience into separate, smaller groups with specific needs and interests – this is called ‘market segmentation’. You may wish to split your target customer base based on age, location, background or any other relevant factors. Separating customers in this way can help you to understand the customer’s lifestyle, their morals and beliefs and crucially, the factors that affect their buying behaviours. Once you know these factors, you will be able to determine whether the franchise opportunity you have in mind fits with these behaviours and how you might tailor your business plan to meet your customer’s needs.

Analyse the numbers

Once you know who your target market is and understand a little more about their buying patterns, you need to look at the numbers. How large is your potential customer base? Is it big enough to sustain your business? Does your ideal customer spend enough to make your business viable? Answering questions such as these can help you with the financial forecasting part of your business plan. To determine the number of prospective customers your market offers, you should consider the below.

  • Who is your addressable market? This is the total number of potential customers in your target market pool.
  • Who is in your available market? This is the share of the market you can reasonably expect to be willing to try your product or service over a competitor.
  • Once you understand these numbers, you can build a strategy to appeal to these different types of potential customer.
  • Does your target market offer opportunities for growth?

This is a fundamental question to ask. While you may be content with the initial numbers available to you, as a business owner, you want to be sure your business will continue to grow. Every business is affected by changes in supply and demand, but you should consider whether in the long term demand is likely to increase or decrease. To help you understand the answer to this, you may wish to consider asking how people’s buyer behaviour will change over time, are they likely to spend less or more in the years to come? A good example is environmental factors which may affect consumer behaviour; more people are making the switch to plant-based diets, refillable household items and other sustainable options. There may also be external factors such as legislative changes, or changes to the area you plan to operate in.

Analyse your competitors

You don’t just need to analyse your potential customer base, but your competitors too. You should start by making a list of your main competitors, both locally and on a wider scale. You should also consider the strengths and weaknesses of each of these businesses. Things you may wish to research about your competitors include:

  • Their geographical location
  • Their product or service offering
  • Their prices
  • What their brand and marketing messages are
  • What customers think of them

The more you can find out about your competitors the better, as this will give you a more widespread overview of the market as a whole. Also, by analysing customer opinions of your competitors, you can understand customer pain points and how your business might better serve them.

Ready to start a franchise business? Check out all of our opportunities here at UK Franchise Opportunities today.