Franchising in a niche industry: what you need to know | Global Franchise
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Sunday 5th February, 2023

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Franchising in a niche industry: what you need to know

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Franchising in a niche industry: what you need to know

Important considerations for when you’re trying to stand out from the crowd

Important considerations for when you’re trying to stand out from the crowd

No matter the industry your business operates in, one thing is certain: your business has to stand out from the competition, preferably in multiple ways. If your business goes about offering the same products or services in the same manner and quality level as your competition, what reason do customers have to choose you?

In franchising, where competition for qualified franchisees can be extreme, standing out both with respect to the underlying business as well as with respect to being a quality franchisor are absolute musts.

There are endless differentiator possibilities for both prospective franchisees and emerging franchisors to choose from. Franchise models love to pride themselves on being unique, all claiming to be “special” or “different.” For example, there are a plethora of pizza restaurants – yet each brand creates its own identity, develops its own stand out menu items, determines its quality and preparation standards, and targets specific markets or demographics.

Every franchisor and franchisee should have a targeted mindset, analyzing, planning, understanding and operating within a defined niche. The ability to succeed in understanding and accurately addressing the niche is what will permit both short and longterm success.

At this point, you may be asking: “How do I develop a stand-out brand of my own?”, or “how do I decide which unique concept to get involved with?”

When it comes down to ultimately deciding upon which niche you should get involved with, three questions should guide your review and decision:

  • Is the niche logical and does it make sense?
  • Do you know what you’re doing, franchise-wise?
  • Will the niche evolve and sustain growth?

Does the niche make sense?

Let’s start with taking a hard look at your product or service. Simply put, as we used to ask, “will the dog eat the biscuit?”

Do you truly understand the cost structure? What would you need to sell it for? Is that going to be acceptable to potential customers? Is it truly distinctive, unique, or superior? Can marketing attract customers or, even better, make your product or service unrivaled – and thus defensible?

Consider the prospective customers you plan to serve. Question if you would purchase the product or service at the price it would be sold for, and if there is an established need for others to do the same.

You must be confident in the logic behind the franchise – too often, brands that fail are trying to follow a trend that is unsustainable and will fade, or the offering is not specific, distinctive, or targeted enough to succeed.

This is much more than identifying and simply pursuing a demographic because of your instinctual knowledge or past professional experiences and believing that is your target market – you need to cut through the clutter and do some real research.

“Too often, brands that fail are trying to follow a trend that is unsustainable and will fade”

Initially, and then at least annually, you should perform market research to validate who the potential, and later, current customers are, and what products and services are truly worthwhile to them.

Do you know what you’re doing, franchise-wise?

Franchising is really two businesses. First, the ability to create a strong and replicable business system that is distinct, proven, and profitable. Second, the ability to build, train, support, and operate a franchise network. This, in itself, is a vocation requiring talent and skill that must be acquired and honed.

From a franchisee’s perspective, they should review the franchisor and its leadership team, and confirm if they are experts in building a brand that will deliver sustained franchise profitability.

Consider if, when investing in this franchise, you will be provided with substantial resources, training, support, as well as continued innovation to operate a successful business.

Of course, evaluate the credibility of the niche market the brand serves, and if the overall ‘package’ will provide what your desire – usually a scalable, incomegenerating, lifestyle-focused business. Franchisees should question the franchisor as to how the brand has evolved and had adapted to market changes. Plus, they ought to have an inside look at the strength of the team behind the business model.

As an emerging franchisor, how can you use your chosen niche to assist in franchise development? By franchising your business, franchisees will expect a consistent stream of customers as well as repeat and recurring revenue. Your franchisees should be able to rely on a leadership team that is comprised of experts who enable operations with the confidence of continued success and professional stewardship of the brand.

As stated, running a successful and quality franchise involves a number of components. Not only is it about the product or service you sell, franchising is about the franchisees who are passionate about being successful using an offering that customers will purchase and appreciate. Show your franchisees how the business can succeed, and provide the training systems for running the franchise model and training their employees.

Will the niche evolve and sustain growth?

Perhaps you have heard that expression, “change should be evolutionary, not revolutionary.” This is especially true in franchising. It is hard to manage change in any business, especially established ones. But it is even more challenging to lead change in a multi-owner, geographically dispersed network.

A good franchisor knows to avoid, as possible, revolutionary change; instead, they implement a series of evolutionary changes to consistently build and adapt to changing circumstances and improvement opportunities.

Revolutionary changes, while sometimes necessary, detrimentally impact network morale, are often more costly and require more aggressive efforts by the franchisor to ensure compliance.

A strong and improving all-around package will increase barriers to entry thus preventing potential competitors from entering the market or ensuring a brand stays ahead. This is where constant improvement and quick adaptability can overcome competitors who are slower, resistant to change, or simply execute poorly.

Barriers can be incorporated in various ways – whether it’s through the superiority of the technology used, supplier relations, the business model itself, or a host of other tools.

Overall, in the eyes of both a prospective franchisee or an emerging franchisor, it is vital to understand that the term “niche” does not apply to simply the product or service sold – it applies to the business system, management capability, the quality of strategies and future developments.

The author

Stephen Schober is the president and CEO of both Metal Supermarkets, the world’s largest supplier of small quality metals with more than 100 franchise locations across the United States, Canada, and the United Kingdom, and FlannelJax’s, the premier axe throwing and recreational sports experience in the United States

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