How to Research Emerging Franchise Brands vs. Large Franchise Systems

When looking into franchise ownership, you’ll typically encounter two main categories: emerging franchise brands (newer, fast-growing concepts) and large, established franchise systems (household names or industry giants). Each option comes with its own benefits, risks, and research methods. In this article, we’ll dive into what to consider when evaluating emerging vs. established franchises and how to conduct thorough due diligence for each.

1. Brand Recognition

• • Emerging brands: May not be well-known outside of their local or niche market.
  • Large franchises: Often benefit from nationwide or even global brand awareness.

2. Growth Trajectory

• • Emerging brands: Potentially high growth, as they’re expanding into new markets quickly.
  • Large systems: Often already saturated certain territories, with more predictable but slower growth rates.

3. Support & Resources

• • Emerging brands: May offer personalized support but could still be ironing out operational processes.
  • Large systems: Generally have structured training and proven processes, but you might get less personal attention.

4. Initial Investment & Fees

• • Emerging brands: Could have lower entry fees to attract new franchisees.
  • Large systems: Typically require higher upfront costs and ongoing royalties.

1. Assess the Founders and Leadership Team

• Background & Expertise: Look into the founders’ track records in business or franchising. Do they have relevant experience, or are they first-time entrepreneurs?
• Vision & Mission: Check how clearly the leadership articulates their goals. A strong vision often indicates a more strategic approach.

2. Validate the Business Model

• Pilot Locations: Emerging brands may only have a handful of locations. Visit or speak with owners of these pilot units to understand their success and challenges.
• Profitability & Growth Rates: Ask for data on sales, margins, and any market research they have done. Because the brand is young, consistent financial performance in even a small number of locations can be telling.

3. Analyze the Franchise Disclosure Document (FDD)

• Litigation & Bankruptcy Items: Emerging brands might not have a long legal history. Fewer (or no) lawsuits can be a good sign, but you’ll want to ask why.
• Earnings Claims (Item 19): If they provide any financial performance representations, dig deeper to ensure these are based on a decent sample size or real-world unit figures.

4. Speak Directly with Existing Franchisees

• Personal Connection: Smaller systems often let you talk openly with owners. Ask about day-to-day operations, the support they receive, and any unexpected costs.
• Growth Potential in Their Market: Find out if other franchisees see untapped market segments. Early expansion could be a major advantage if done correctly.

5. Evaluate Their Long-Term Plan

• Scalability & Innovation: Emerging brands should demonstrate a clear roadmap for national or regional expansion, as well as the ability to adapt to shifting market trends.
• Financial Reserves: Understand if the franchisor is well-capitalized or relies on continuous franchise sales to fund existing operations.

1. Leverage Brand Reputation

• Online Reviews & Public Perception: Check consumer feedback, social media sentiment, and local/regional presence. An established reputation can be a major asset.
• Competitive Landscape: Explore how the brand stacks up against direct rivals. Even large franchises can lose market share if the competition is aggressive.

2. Evaluate Historical Performance

• Track Record: With a longer history, you can see how the franchise performed during economic downturns or industry disruptions. Did they innovate successfully or lose ground?
• Mature Support Systems: Established franchises should have refined training programs, marketing resources, and operational playbooks. Verify the quality and timeliness of this support.

3. Deep Dive into the FDD

• Litigation History: Larger systems might have a record of lawsuits. Assess if they’re routine (e.g., franchise disputes over territory) or indicative of deeper issues.
• Franchisee Turnover: Check how many units open and close or change hands each year. High turnover can be a red flag; consistent growth suggests stability.

4. Contact Multiple Franchisees

• Diverse Markets: Speak with owners in regions similar to your target location. Their experiences can shed light on day-to-day operations and profitability.
• Franchisee Satisfaction: Ask if franchisees feel supported or if they experience tension with the franchisor. A well-established brand should have robust systems for addressing franchisee needs.

5. Assess Territory Availability

• Market Saturation: In large systems, prime territories might already be taken. Ensure the available territory has enough customer base to meet your revenue targets.
• Competition with Fellow Franchisees: Review any territorial protection clauses to confirm that you won’t have to compete with another franchise owner nearby.

1. Consult Professionals

• • An accountant can verify the numbers and check financial viability.
  • A franchise attorney can spot red flags in legal agreements.

2. Attend Discovery Days

• • Both emerging and established brands often host discovery events. Interacting with the corporate team can reveal a lot about company culture and support systems.

3. Test the Brand as a Customer

• • For brick-and-mortar franchises, visit an existing location to see customer experience firsthand.
  • For service-based franchises, see how easily you can schedule or purchase services.

4. Ask Targeted Questions

• • For emerging brands: “What’s your plan for scaling support as the franchise network grows?”
  • For large systems: “How do you maintain innovation and agility in a mature system?”

5. Trust Your Instincts

• • If something feels off—like overly optimistic promises or dismissive attitudes toward your concerns—dig deeper or look elsewhere.

Whether you’re drawn to the bold potential of an emerging franchise brand or the proven reliability of an established system, thorough research is crucial. Each path offers unique opportunities and challenges, but by examining financial data, speaking with current franchisees, reviewing the FDD, and testing the brand’s market appeal, you can make a well-informed decision that aligns with your goals.

Need help comparing specific franchise opportunities or want personalized advice on conducting due diligence? Feel free to choose a time to talk. Armed with the right information and expert guidance, you’ll be better equipped to find the franchise—big or small—that sets you up for long-term success.