Today’s business landscape is brimming with start-ups operating in niche markets. There are boutique fitness brands, boutique coffee shops, highly-targeted online marketplaces, single-focus food outlets, financial services and insurance platforms appealing to certain demographic profiles…you get the picture.
It seems like a brilliant solution to setting up business. And with a franchise, someone else has already spotted the potential and prepped the systems for you to step in and operate.
So let’s look at how to spot longevity in a franchise targeting a niche market.
Niche, boutique or specialist?
What we call the market profile isn’t important – you can substitute the term niche for specialist if you prefer. Boutique has become a more contemporary way of saying the same thing – we know our customers want x and we are focused on providing the solution for x in our unique way.
Think about the business in front of you.
Does it have true originality or is it simply a new face in an established market?
This is an important consideration because sophisticated marketing assuring you of the genius of a new idea can be very persuasive. Perhaps the concept isn’t as original as the founders believe. Perhaps it is, and you can see the brilliance of the idea. The only way to discover this is by doing independent research on the market.
As you would with any business purchase, consider the competitors and what they offer. What are the real, identifiable points of difference that would make you, as a consumer, choose this brand above a competitor?
Is this a repeat custom or novelty business?
What is it that would get you to return to the business? Is that one amazing difference enough? Will the service keep you coming back? Or is it a novelty visit that won’t be repeated that often?
Do the prices invite repeat custom? Right now costs are a major concern for most consumers so if this is a discretionary item or service, is it a compelling enough purchase to be a regular spend?
Can this business be positioned in a zone with low rents or will it demand a high visibility, high rental footprint?
What is the market size, and is there really an untapped market? If so, why do you think this particular brand will fill the gap? How niche is the customer profile? Will the customer demographic shrink or grow? If customers have a natural lifespan with the business is there a naturally recurring new cohort of customers?
If this is a unique business, and remember, that means literally one of a kind, how far will people travel to use its services or purchase goods?
What could impact the niche customer profile?
If the business you’re considering is targeting an untapped market there is a huge potential for success. But it is important to look at trends in retail, technology, health, travel and the general economy to see if there is anything that will dampen enthusiasm for the brand among its potential customers.
Think about some negative scenarios that might impact the business and consider whether customers would still visit.
One of the big questions that faces a business owner is knowing when, and how, to diversify. It’s particularly difficult for a boutique business which has a single focus.
However, customer desires, market trends and economic shifts can all have an impact on a business, forcing change. Do you believe, does the franchisor believe, there are ways to diversify that stay true to the brand’s core mission?
Is the franchise set up to succeed?
A boutique business has a highly targeted and therefore limited customer profile. A niche business has a clear and finite offer. As specialists, these businesses should have in-depth knowledge of their customers.
So is the business behind the scenes set up to deliver what’s required? Is it highly structured with compliant franchisees who don’t dilute the offering? How effective is the marketing program? What steps does the franchisor take to watch for new ideas and influences that will impact the business?
There is no crystal ball but you want to be confident the business is well-structured, clear about delivering its promise, and above all, resilient.