How to Evaluate a Local Home Improvement Franchise Opportunity: Top 3 Signs of Success
If you’re considering investing in a home improvement franchise opportunity, you’ve picked a great time to get started.
For starters, the remodeling market is booming. Research by the Harvard Joint Center for Housing Studies shows that consumer spending on home remodeling grew by 7.3% in the fourth quarter of 2018, continuing a pattern of strong annual growth that’s persisted since 2014.
What’s more, franchise opportunities abound. A quick Google search for “local home improvement franchise opportunity” yields more than 10-million results.
On the flipside, though, these conditions have made it a little harder to choose which brand to invest in. After all, when you’re spoiled with choice, you want the best!
To that end, today’s post is meant to upgrade your home improvement franchise opportunity evaluation skills by sharing 3 key signs of success to watch for.
The #1 Sign Of Success — Franchise Management Experience
In 2018, Ed Teixeira drew from the lessons learned over 35 years of franchising to write an article about franchise evaluations for Forbes magazine. That article would go on to become the Editor’s Pick and earn tons of shares on social media and business forums.
In that article, Texeira’s number-one piece of advice was to audit the franchisor’s management experience, as well as that of any key executives and support staff.
It might seem obvious to align yourself with an experienced franchise, but this definitely deserves to be restated.
“Franchisor leadership should have a cross section of business skills and experience,” writes Teixeira.
Take us for example. We’ve been around since 1982. In that time, we’ve built 45,000+ kitchens and hundreds of successful franchises across America, and earned thousands of referrals nationwide. To learn more about our background, experience, and company history, visit the About Kitchen Solvers page.
Second The Best: Consistent Profitability From Franchisees
Unless the franchisor is a startup, you should be able to get your hands on 3 years of audited financials. While reviewing this material, look for continuing and growing streams of revenues from royalties, and watch out for companies that make the majority of their money on initial franchise fees.
Also veer away from franchises that aren’t transparent about their financial up front. All established brands will make a Financial Performance Representation disclosure under Item 19 of the Franchise Disclosure Document (FDD). The best brands want to show you this information, not hide it. Again, you can take us for example: we post a sample of our Item 19 earnings information on our website for all to see.
Calculate The Net Franchise Growth
Review Item 20 of the FDD and compare the growth of new franchisees to the rate of franchise terminations. This will give you a clear picture of the franchise’s net growth and cut through any misleading claims. At this stage, it’s also a good idea to look at the number of franchises sold but not opened, as this can expose a franchisor that’s more concerned with collecting initial startup fees than supporting franchisees.
Try Out Your 3-point Home Improvement Franchise Opportunity Evaluation
In order to perform this review, you’ll need a copy of the Franchise Disclosure Document (FDD) for each home improvement franchise opportunity you’re evaluating.
To obtain the FDD, you’ll need to contact the franchisor. Everybody’s process is different. Ours is easy: call 608-615-7399 or visit the Kitchen Solver’s Contact Page to get started.