The Market Study: Far More Than a Banking Document
In the process of opening a franchise outlet, the market study is often relegated to the status of a supporting document for the financing application. The candidate sees it as an obligation, the franchisor sometimes views it as a drag on the recruitment process. This perspective is not only reductive — it is dangerous.
A well-executed market study is a strategic decision-making tool that protects both parties: the candidate committing their savings and taking on debt, and the franchisor entrusting their brand and reputation to a new partner.
For the Candidate: Projecting with Clear Eyes
The franchise candidate finds themselves in a paradoxical situation. They benefit from a proven concept, a recognised brand and network support — but they remain an independent entrepreneur taking personal financial risk. The market study is their primary tool for objectifying that risk.
Here is what a rigorous market study provides the candidate:
- Validation of the location: is the area proposed by the franchisor truly the best option? Are footfall, accessibility, target density and direct competition favourable?
- Realistic revenue estimation: the forecasts provided by the franchisor are often network averages. A local study refines these projections based on the specific characteristics of the area.
- Risk identification: a competing shopping centre project 12 months away, a traffic plan change, an unfavourable demographic shift — factors that only an in-depth field analysis can reveal.
- Banking credibility: a financing application backed by a market study from an independent third party has a significantly higher acceptance rate than one based solely on franchisor data.
For the Franchisor: Protecting the Network and the Brand
The franchisor has just as much — if not more — interest as the candidate in having quality market studies. Every failed opening carries a considerable cost:
- Direct financial cost: opening support, training, network animation team mobilisation — investment lost if the outlet closes within the first 24 months.
- Reputational cost: a closure damages the brand's image locally and can discourage future candidates in the area.
- Legal cost: a struggling franchisee may turn against the franchisor, particularly if the forecasts communicated in the pre-contractual disclosure document prove unrealistic.
- Opportunity cost: a zone poorly served by a struggling franchisee is a zone lost for network development for the entire contract duration.
By requiring or funding independent market studies for each candidate, the franchisor secures their territorial coverage and strengthens the overall quality of their network.
The Trap of "In-House" Market Studies
Some networks produce market studies internally and provide them to their candidates. While this approach often stems from good intentions, it poses a fundamental conflict of interest: the franchisor is both judge and party. They have an interest in the candidate signing, which can — consciously or not — bias the analysis.
Banks understand this well. A growing number of banking institutions now require that the market study be carried out by an independent third party, not contractually linked to the franchisor. This is a guarantee of objectivity that strengthens the application's credibility.
What a Quality Franchise Market Study Should Contain
A franchise market study that truly fulfils its role goes well beyond compiling census data. It must include:
- Catchment area analysis: demographics, income levels, consumer habits, footfall patterns, urban development projects.
- Field competitive analysis: physical survey of direct and indirect competitors, assessment of their positioning and momentum.
- Network data integration: performance of comparable network units, penetration rates in similar areas, internal benchmarks.
- Revenue forecasting: estimated revenue potential with low, median and high scenarios, and sensitivity analysis.
- Strategic recommendations: optimal positioning, offer adjustments, specific watch points for the area.
The Role of the Trusted Third Party
At MASOF Consulting, we position ourselves as a trusted third-party partner between the candidate, the franchisor and the bank. Our team has over 14 years of hands-on experience as franchisees and franchisors, giving us a unique understanding of the stakes for each stakeholder.
We systematically integrate network data into our analyses — because a franchise market study that ignores network performance is an incomplete study. And we produce bankable studies, in a format that credit analysts know and value.
For the candidate, it is the assurance of committing with full knowledge of the facts. For the franchisor, it is the guarantee of qualitative and sustainable network development.