Are franchise businesses a good investment?

  (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

Franchises can be an excellent investment, especially if you’re new to the business world. It’s definitely not the right choice for everyone, however. So before you decide to buy into a franchise, it’s essential to do your research to determine whether it’s genuinely a good investment for your particular goals and situation. This guide will help you figure out whether buying into a franchise is the right choice for you and give you an overview of what to expect once you take the plunge and own your own franchise business.

The two types of franchise opportunities you can invest in

If you are unfamiliar with the different ways you can purchase a franchise business, there are two types of franchise business available that we will list below:

Standard franchise - This would be any franchise you buy that is a new location in your area, and your initial franchise fee would pay for the location and store to be built. These types of franchise opportunities can be found using franchise directories such as Franchise UK.

Franchise resales - A franchise resale is a franchise location that a previous franchisee owned that is up for sale. Many new entrepreneurs are interested in purchasing a franchise resale as these types of franchise opportunities can sometimes be cheaper. As long as that location was a popular store with good reviews from the local community, the previous franchisee was operating in. As a result, you can see the fastest return on your investment (ROI) possible.

If you are interested in learning more about franchise resales, these opportunities are commonly found on businesses for sale directories such as Businesses For Sale UK.

The perks of owning a franchise

Now that you know the different types of franchises that are available, we will now let you know some of the main advantages franchises have to offer over starting your own business solo:

  • Tried and tested business model

Many people are drawn to franchises for their tried and tested business model. They know what they're getting into before diving in and have the franchisor's support behind them. Plus, franchises are more affordable than starting your own business from scratch. 

The only downside is that you need to pay a fee each month called a franchise royalty fee to continue operating your franchise business, although franchises are known to see a faster return on investment, so the benefits do outweigh the costs as long as you do your due diligence before buying a franchise.

  • Ongoing training & support

The franchisor is the individual, company, or organization that owns the rights to the trademark and offers it to individuals who want to become franchisees. Franchisees are independent business owners who use the franchisor's trademark under an exclusive license. The franchisor typically provides ongoing training and support for its franchisees, as well as monitoring their performance. However, not all franchises are alike, so before investing in one, it is essential to do your research and ask questions about how much of your time will be spent on work versus managing employees, what type of products or services you will be providing, if there are any strict requirements for opening your location (such as being near certain stores), etc.

  • Access to an experienced team

Franchises come with the benefit of access to an experienced team. Franchisees have access to the franchisor's expertise and their established systems and procedures and often have discounts on products and services. Franchisees may also get assistance with marketing and operations, which can streamline the day-to-day tasks that small business owners need to focus on.

  • Higher success rates

This is one of the most common questions people ask when considering whether or not to purchase a franchise. The answer is, in short, yes. Franchise owners have higher success rates than small business owners for many reasons. One of the main reasons is that they have fewer startup costs (franchise fees) than independent entrepreneurs and are usually able to avoid many of the pitfalls that small business owners face during the early stages of growth, like paying large deposits, high rental rates, expensive leases, marketing expenses, and costly building upgrades.

  • Already established customer base

The most significant advantage of buying a franchise is that the brand name already has an established customer base. You don't have to go through the process of getting people to know and trust your brand - they already do. Franchises offer an established customer base, meaning you can focus on running the business rather than trying to build one. In addition, franchises are operated by experts in their industries who have years of experience and knowledge in the field to have your back when needed.

Would buying a franchise be the right path to entrepreneurship for you?

Franchises are a prevalent option for new entrepreneurs, and they provide excellent support, business models & success rates. This is why franchises have been booming and becoming more and more popular among new entrepreneurs and even experienced business owners alike in recent years, and this trend is showing no sign of slowing down anytime soon, so it might be time to decide whether buying a franchise would be your ideal path to entrepreneurship.

The bottom line

So, are franchise businesses a good investment? Of course, they can be, but only if you are willing to put in the necessary time and effort to achieve success. If you want to make money quickly, then there may be better choices out there for you. It would be best if you had patience and perseverance when starting and operating your own business, whether a franchise business or an independent business, although franchises do tend to achieve success faster than most startups.

This article was written in cooperation with Infinity Business Growth Network