Is franchising a Good Investment

When the time comes to go in business for yourself, the question arises whether or not it is a good idea to franchise. When you purchase a franchise, you are essentially buying the right to operate a retail location under an established brand. There is usually an upfront franchise fee and monthly royalties or a % of sales must be paid as well. Here are 5 scenarios where it makes sense to purchase a franchise.

1. Lack of Experience in an industry.

The failure rate for new business are usually very high, however they are much higher if you have no experience whatsoever in that industry. If you have no experience and would like to enter a particular industry, franchising makes sense.

2. Access to Inventory / a product

If you are looking into selling particular product or having a specific type of business but do not have a solid, consumer tested product, than a franchise could be for you. Established franchise businesses already have a product or inventory that has proven to be successful and known by consumers.

3. No marketing experience.

Regardless of your idea, business, or product, marketing is a key component to success. Without a sound marketing strategy your business can go out of business faster than you think. Successful franchises have an established marketing strategy and brand that is known to consumers. Being able to tap in and ride the coattails of an existing brand’s marketing efforts can be very beneficial.

4. Little room for trial and error

Knowing how to operate a new business can consist of a good amount of trial and error. This is OK if you have money to invest in and lose until you get it right. However, if you have little room for error and need to get it right from the start, than investing in a good franchise opportunity will help avoid pitfalls and allow you to know the most successful way to operate your business.

5. Not too savvy with real estate deals

As they say in the world of retail, LOCATION, LOCATION, LOCATION. As much of a cliche as that sounds, it is very true. Having the right location, to service the right market, and getting the right lease/purchase terms to make sure that you succeed, are vital. Franchises usually have a real estate department that holds your hand throughout the entire process of finding the right store location and negotiating the most favorable terms.