Are franchises a good investment?
You’ve explored your career options through career transition services, and decided that becoming a franchisee could offer you the challenge and profit potential that you desire at this stage of your life.
Before you jump in at the deep end, you should consider if investing in a franchise will be good business for you.
Franchises have a good record through the economic cycle
Whatever the state of the economy, starting a business can be stressful. It can be risky, too. According to the Bureau of Labor Statistics, one in five new businesses fail within two years, and almost half of new businesses fail within the first five years.
As a franchisee, the business you buy has the backing of a brand that has been through the economic cycle at least once. The franchisor has the experience of operating in the toughest of times. That’s experience they will share with you.
Franchisees receive support that other new business owners don’t
The franchisor does not want you to fail. They have a tried and tested business model, and they will support you to become successful – after all, your success reflects on their success.
Depending upon the agreement you sign, you will receive initial and ongoing training. You’ll also have the stability of working to operating procedures and processes that have been proven to be successful. You may receive support with HR issues. You may also have the backing of a marketing team and a message that has been highly researched, and developed to appeal to your target customers.
You don’t get all of this (and more) as an independent business owner.
You’ll sell branded products or services that sell
Your customers know the brand. They have been buying it for years. Or it has been recommended by other loyal customers. The brand has history behind it. People buy brands they trust. Especially when economic conditions are below par.
This brand recognition reduces your risk, and increases the potential to maintain (and increase) profitability throughout the economic cycle. When you invest in a franchise, you are investing in a business that already has market traction – the traction that a new name can take years to create.
Cheaper overheads feed to the bottom line
Not only do you benefit from highly recognizable branding as a franchisee, and the support other small business owners lack, you’ll also benefit from the advantages of scale. This is especially true of the stock and supplies you need to buy.
The larger the franchise business, the more power they have to drive costs down – and you’ll benefit from the franchisor’s muscle. Lower costs translate into greater profit potential. You may also benefit from lower startup costs as well as operational expenses as a franchisee.
If you have the skills and capability to manage and run a new business, buying a franchise should improve your chances of success. You’ll be backed by a larger company, benefit from support, and operate under a recognized and trusted brand name.
To learn more about the pros and cons of investing in a franchise, and to learn about the latest franchise investment opportunities that match your skills, experience, and goals, contact New Ground Consulting today.