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
Buying an Investment Franchise Opportunity
Nick Strong, MD - Select Your Franchise
An investment franchise is one that generally requires a good amount of initial investment that may require some time to achieve a return. You could consider all franchise opportunities an investment in one sense since all will require some form of initial funding in order to get started and then look to repay it as the business becomes profitable.
However, some franchises require very little in the way of initial investment. There are some low cost franchise options that you could even be started up off a credit card or small personal loan.
Aside from these, there are a number of franchises that can be considered particular suitable as an investment option. Typically, they may be management type business options which do not require the investor to take too much of a hands on approach but rather recruit staff to manage the day-to-day operation. Popular options would of course be high street retail franchises, cleaning franchises or any other options that have the potential for hiring staff.
Another attractive option as a franchise investment would be to buy an already established franchise business. These are commonly referred to as franchise resales. The franchise for sale may have already been running successfully for many years but for reasons of maybe life direction or retirement, the owner wishes to sell the business as a going concern. Although naturally these will attract a higher price tag, they will usually begin to repay the investment straight away which makes them an attractive option.
Whichever option you choose its important to take due diligence in making your investment. Investing wisely and having done adequate research, will ensure you the best possible chance of success in your business venture.
Tags: franchise investment, franchise opportunities, franchise resales, franchises for sale, nick strong
Buying a Franchise Business: A guaranteed investment?
Joel Caws - Technical Director, Select Your Franchise
It seems a bold statement buy could buying a franchise business really be a guaranteed investment?
Well it would be great if this were true. To make a guaranteed investment is surely every business investors dream, the holy grail! Unfortunately, there is nothing guaranteed in life least of all when it comes to business.
There are however ways to ensure best probability of success. Many investors in the stock market use market signals to improve their chances of investing in the right stocks or shares and so increase their probability of getting a return on their investment.
In business, marketing departments will use statistics at their disposal to assess where best to spend their money to achieve the best return.
The point here is that, although the market trader and marketing department will do their best to put their money where they believe they will get a return, there is in fact no guarantee they will make a profit on their investment or even get their initial investment back.
We can see that it makes sense to study as much as possible where you are putting your money. Then you can invest wisely and know that you have made an informed choice.
As with any investment, franchising does indeed carry a risk. The benefits though, are that there is some statistics and track record to look at which can help you minimise the risks of your investment:-
- The recent BFA/Natwest 2010 Survey reported that 89% of franchise businesses in the UK were trading profitably in 2009. As opposed to conventional business start ups which commonly 4 out of 5 don’t make it beyond 3 years of trading.
- Franchise opportunities should be based on a proven system which gives a greater degree of security. To be a franchise, the franchisor should have run pilot businesses to test their concept and then documented the processes that make the business a success.
- Existing franchisees can help to reassure you that the concept works. This is why its important to speak to existing franchisees during the buying process as they have already walked the road you are walking.
Given the above, a franchise opportunity can appear favourable, however that doesn’t mean you should throw caution to the wind and invest your money into the first franchise opportunity you see. Like any investment, consider carefully and research the specific franchise that appeals to you. Remember its a long term commitment so you need to make it a good one!
Tags: Buy a franchise, franchise business, franchise investment, franchise opportunities, franchising, joel caws
