Avoid Franchise Fads

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It's not easy to determine the next hot franchise with staying power from just a flash in the pan. Ebay selling stores seemed to be the next big thing, but as Ebay improved its technology and got easier to use, people no longer needed to use a service. On the other hand, many people in the industry laughed at the idea of junk removal services and that business sector is currently thriving.

Fad franchises make a huge splash but die out quickly, taking your investment, time and effort with them. While there's no exact science for fad franchise detection, some universal red flags may signal your need to research the opportunity extra carefully.

Be wary of any franchise with one product or service focus. If the franchise is only offering one thing to the public, it's more likely to fall victim to a change in customer thinking or technology. For example, stores focusing on just ink for printer cartridges have suffered in recent years because of a change in the way consumers use and access ink products.


Inexperienced owners may also doom a franchise. Fresh owners may lack the business insight and experience necessary to succeed in a volatile market. Look for owners who have broad experience in business management outside of just one industry.

While a sudden market surge may seem like a good thing for any franchise, be cautious if the market appears over saturated. Too many locations won't necessarily doom a franchise, especially a very popular one, but it does mean the owners must use extra diligence regarding new location placement and growth.

As with any franchise opportunity, make sure the service or product is necessary in some way. Franchises that rely on luxury items or services often struggle in hard economic times. When looking at necessity, consider the entire market. While you may not view tutoring as necessary, education franchises historically do well even in tough times because parents will make sacrifices so that their children succeed. Research any franchise opportunity you are interested in by getting information from the franchiser today.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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