Buying a franchise: how to assess local demand

A brand that succeeds in one town or city may not attract the same demand in another. Before joining a franchise network, check whether there are enough local customers for the specific offering, at the prices and on the terms under which you will actually operate. The aim is not to prove that the franchise is good in general, but to establish whether it suits your chosen market before signing and committing funds you cannot recover.

1. Define who would buy and where they would come from

Start with a clear hypothesis: who is your customer, what need are you meeting, and why would they choose your offering? “Everyone living in the town” is not precise enough. A service aimed at families requires different information from a business lunch offering, a tourist service or a specialist shop.

Define the area from which customers could realistically travel. Do not rely solely on administrative boundaries. Journey times, public transport, parking, barriers to pedestrian access and residents’ habits can significantly affect how accessible a location is. For deliveries, check the actual delivery area and costs, rather than just distances on a map.

Draw up a brief market profile using publicly available data from the Croatian Bureau of Statistics, local authorities and, where relevant, tourist boards. Record the year and scope of each data source. Population figures, for example, are not the same as the number of potential customers, and overnight tourist stays do not demonstrate year-round demand.

This stage should produce a testable statement, such as that the offering targets people in employment who shop during the working week, rather than a vague impression that the location is busy.

2. Compare local alternatives and observe behaviour

Your competitors are not just outlets selling the same product. Customers may meet the same need through a different service, online shopping or a decision not to spend at all. Compare both direct competitors and alternatives.

For each important alternative, record:

• what the customer receives and at what publicly advertised price;
• opening hours, accessibility and ordering options;
• who the offering is clearly aimed at;
• which problems recur in public reviews;
• what your franchise could offer differently within the permitted standards.

Next, observe the proposed location at different times. Distinguish between weekdays and weekends and, where necessary, between the peak season and the rest of the year. Note weather conditions, events and other circumstances that could distort the picture.

Counting passers-by is not the same as measuring demand. What matters is whether those passing are your target customers, whether they have a reason to stop and whether the timing suits their purchasing habits. One busy Saturday morning is not enough to draw conclusions about the whole week.

3. Test interest without promising something you cannot yet offer

Conversations with potential customers are more useful when they focus on actual behaviour. Instead of asking “Would you shop here?”, ask where they currently shop, how often, what is missing and what would make them switch provider. Praise for an idea is not the same as a willingness to pay.

If the franchisor permits it, agree on a limited test of interest: a presentation of the concept, a demonstration or a trial offering organised in accordance with applicable rules. First, clarify in writing whether you may use the brand name, visual identity and promotional materials. Do not present yourself as an authorised outlet before you have the right to do so.

The General Data Protection Regulation (GDPR) applies when collecting personal data. Define the purpose and lawful basis for processing, provide the required information and collect only the data you need. For a basic assessment of interest, anonymous notes are often sufficient, without creating a contact list.

Decide in advance what would justify continuing negotiations and what would call for further investigation. Do not choose your criteria only after seeing the results. Distinguish between expressed interest, a specific enquiry and an actual purchase: each carries a different weight as evidence.

4. Relate your findings to the franchise terms

Present your findings to the franchisor and check whether any necessary local adaptations are permitted. If customers want different opening hours, smaller pack sizes or another delivery method, do not assume you can introduce these yourself. Demand for an adapted offering does not establish the viability of a concept that prohibits those adaptations.

Ask the franchisor to explain how they assessed your market and which comparable locations underpin their recommendation. Keep their data separate from your own observations and assumptions. Approval of a location is not, in itself, a guarantee of customer numbers.

Croatia has no dedicated franchise law or mandatory, standardised pre-contractual disclosure document specifically for franchises. The contractual relationship is governed by the Civil Obligations Act, including the principle of good faith and fair dealing, and, depending on the issue, by competition, trade and intellectual property legislation. Have a lawyer check how the franchisor’s specific obligations concerning market assessment and approved adaptations are recorded in the agreement.

Practical takeaway: before signing, prepare a one-page summary of your customer profile, local alternatives, test results and outstanding questions. If demand exists only with changes the franchisor will not allow, that is a reason to reconsider the investment, not to make an optimistic assumption.