One of the great benefits of the franchising industry is its vastness. With a significant number of industries and specific markets to explore, prospective franchisees often have several options to choose from that align with their interests. However, there are circumstances when a specific market will be overly crowded with similar businesses, resulting in greater competition. This could lead to market saturation, which occurs when consumer needs are already met and there is no room for the market to expand or grow due to insufficient demand.
Prospective franchisees should know how to recognize the key signs of overly crowded markets to avoid entering a space flooded with competitors. This awareness can assist them in their search for the right franchise opportunity. Below are some of the ways to evaluate a market.
Perform a competitor analysis
Conducting a competitor analysis before investing in a franchise is an excellent way to assess some of the larger players and see how they measure up. A crowded franchise market will be exactly that—crowded. If you find many similar businesses already exist in the city/territory you’re interested in, it could indicate the market is crowded and/or saturated.
Once you can tell how many competitors there are, dig deeper into their operations. How do the products and/or services compare? Is there one that stands out in the crowd? Understanding these elements can help you navigate your decision to invest in a particular franchise business while offering insight into how other businesses in an industry of interest operate.
Determine the proximity of businesses
After assessing the number of competing businesses that exist, look around your city or town and assess the proximity of the competitors. For example, if a salon franchise is on every corner, you could find it a bit harder to enter this space. However, the franchise business you are interested in should offer details (i.e., their service range, pricing, how they meet customer needs, etc.) that can offer you some reassurance that despite being a booming industry, they have a plan to stand out and grow.
It is important to remember that just because there is a higher-than-average number of businesses in the same proximity does not mean you should not pursue an industry you are interested in. In fact, it can be a sign of high demand! Thoroughly researching the franchise businesses you want to pursue and determining how they address competition is key.
Assess market projections
Market research on several industries is available and accessible online, which can be a great tool to use in the beginning stages of your franchising journey. If you have a couple of industries in mind that you want to explore, first see how they have been performing over the years and then see what is expected. Although these future projections are not set in stone, they can offer excellent insight.
If your assessment shows some stagnation in growth, it could indicate that the industry/market has reached a standstill, which could indicate that it has reached saturation.
Franchising with The UPS Store
The UPS Store has over 30 years of franchising experience in Canada and a proven business model from which our franchisees benefit. As one of the most recognizable brands in the world, we are recognized as an industry leader, making us stand out among the competition.
If you are interested in joining our franchisee network, our FAQ page covers several areas of the franchising process. If you are ready to take the next step in your franchising journey, please fill out our online inquiry form to learn more about franchising with The UPS Store.
