Is a Franchise Business a Safe Investment?
Joel Caws - Technical Director, Select Your Franchise
Investing can be a great way of putting spare finance to work in order to make more. There are plenty of ways to invest money from simply placing it in a high interest bank account or investing into a business venture.
Generally, the higher the risk, the greater the reward or loss. When you place an investment into a savings account you know you money will be safe, however the return you will get on the investment is typically low. It’s also linked closely to the interest rates at that point in time, so when rates go down, your return on your investment will also be reduced.
Some people choose to invest in stocks and shares which is a higher risk activity. The returns can be high for those who have taken the time to understand the way company stocks and shares move, but for those who are uninformed it can be a fast way to lose your money.
Property is another popular investment option with a fairly solid track record. Although markets can dip up and down in the short term, they tend to rise steadily in the long term so investing money in property might realise a return if you are prepared to wait for it.
Investing in a business is also a popular option. There are several ways to do this by either starting up a new business or buying an existing one that is already trading.
Choosing a franchise business may help to improve the success rate further as a franchise is based upon a proven system. Many franchises can be run as management franchises which are perfect for those who want to invest but not get caught up in the actual day-to-day operation of the franchise business. By recruiting staff to run the business, you can effectively sit back and manage the business without getting your hands dirty.
There are also franchise resales which are franchise businesses that are already setup and have been trading for some time. Choosing a franchise resale can further reduce risk as there will be a trading history to look over before making a decision to invest.
No investment is without risk of some kind, however a franchise business has the added backing of a proven business formula and training and support. Generally the success rate is good with around 9 out of 10 franchisees in any given year turning a profit*. If you do choose to invest in a business or franchise option, one thing is for sure: the success of the venture (and the return on your invested finance) will be measured by your commitment, hard work and dedication. Without a determined and committed approach, any business will likely fail.
(* figures from by BFA/Natwest annual franchise surveys)
Tags: business, franchise, franchise investment, investment, joel caws
Considering Self-Employment? Could a Franchise be right for you?
Joel Caws - Technical Director, Select Your Franchise
Whether you are simply dis-satisfied in your current job or just needing a change, self-employment is something that many of consider as an alternative to working for another company. Of course, its easy to see why: the money you earn is yours to keep, you are your own boss and can manage your own time.
The big challenge for many though, is that while self-employment is an attractive option, it does require a person to have a sale-able business proposition that people will want to pay money for, and it requires a wide set of different business skills. Of course the latter is easily fixed by outsourcing tasks that you don’t know how to do yourself. The most obvious is book keeping and accounts that many small businesses often outsource to a dedicated book keeper or company that specialises in those skills.
The biggest challenge for any new business owner will be the ability to manage their resources effectively and to market and sell whatever business idea you have. Many business owners can make the mistake of thinking they can simply start a business up, and of course customers will come flocking to buy whatever they are offering. Anybody parting with cash will want a convincing reason to buy whatever it is you are offering so its important to think: do people need what I’m selling, if not why will they buy it? Does you product and sales message provide a compelling reason for people to buy? This is all about proper market research and planning a solid marketing strategy prior to launching your business.
If that sounds quite in depth, that’s because it usually is! However, there is another way which helps to by-pass alot of the hard work in testing the market and finding out if what you have to offer really can form a viable business model.
A franchise business is a tried and tested business model which you can trade as if it was your own business. In effect, you buy the right to trade under the companies brand name and use their already proven business formula. The main differences to setting up your own self-employed venture are:-
- Much of the hard work of researching the market and testing the sales potential for the product/service has been done.
- You will be setting up a business with a tried and tested business formula.
- Some franchise brands are well known and recognised which can give you an edge against competition.
- You will receive training on how to effectively run, market the business and sell the products or services offered.
- 90% of UK franchisees trade profitably in any given year according to British Franchise Association/Natwest annual franchise surveys.
- You are you own boss! You will effectively be running your own business and you will ultimately be responsible for its success or its failure.
It’s easy to see why going the franchise route is chosen by many when considering self-employment. It offers many of the benefits of self-employment while helping to reduce the risks. Of course there is no such thing as risk free in business, however, with dedication to your chosen franchise system and a willingness to work hard you can make your franchise business a success.
Potential Changes in the Budget affect Franchise Businesses: Part 2
Carl Reader, Dennis & Turnbull Ltd
In this second part on the likely affects of the emergency 2010 budget on franchise business, we will look at Business, Employment and some other changes.
To find out more about changes in taxation, please see the previous posting.
Business
The government is to focus on improving the flow of credit to smaller firms. This will include the possibility of establishing a loan guarantee scheme to replace the Enterprise Finance Guarantee programme and the use of net lending targets for nationalised banks.
Some backdated demands for business rates will be cancelled.
Pensions
The default retirement age is to be phased out, and a review will be held to establish the dates at which the state pension retirement age begins to rise to 66. There is a commitment that, in the case of men, this will not be before 2016 and, in the case of women, not before 2020.
Rules requiring mandatory annuitisation at 75 are to be dropped. At the moment, people who establish a pension savings fund must use the money to purchase an annuity, or an annual income for life, when they reach the age of 75, preventing them from passing on the capital to their heirs.
The link between the basic state pension and earnings will be restored from April 2011 with a guarantee that pensions are raised by the higher of earnings, prices or 2.5 per cent, as proposed by the Liberal Democrats.
Thus far, the government has not offered a policy on pensions tax relief. The Liberal Democrats had been in support of abolishing all higher tax rate relief, capping relief at the basic rate of income tax.
Employment
All existing welfare-to-work programmes are to end and are to be replaced by a single welfare-to-work programme.
Those Jobseekers’ Allowance claimants who must deal with the most significant barriers to work will be referred to new welfare-to-work scheme at once rather than after 12 months. In the case of those Jobseekers’ Allowance claimants aged under 25, they will be referred to the programme after six months.
The EU
There will be no further transfer of sovereignty or powers to the EU over the course of the next Parliament.
The government will work to make sure that the application of the Working Time Directive in the UK is limited.
Any future European treaty that involves the transfer of power will be subject to a referendum.
The environment
A green investment bank will be set up.
The government is to press ahead with a high-speed rail network but will reject plans for additional runways at Gatwick and Stansted.
A national planning statement will be drawn up to allow a process for replacing existing nuclear power stations with new ones, although Liberal Democrat MPs will be allowed to abstain on any vote on the plans.
Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.
The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.
