Thinking about becoming a business owner through franchising? You’re not alone. Even prior to the COVID-19 pandemic, the franchising industry was seeing solid growth. But based on the Economic Outlook report from the International Franchise Association (IFA), that growth is amplified now.
There are many reasons behind the franchising boom. After the 2020 shut-downs and lay-offs, many people decided that it was the ideal time to take a leap of faith and invest in their future. They no longer wanted to be financially dependent on a job that could easily be eliminated. That, coupled with the Great Resignation, precipitated by those seeking better careers and work-life balance, placed many in the enviable position of becoming business owners, putting their financial future in their own hands.
If franchising is part of your future, the stats are in your favor. The Value of Franchising is a report put out by the IFA and Oxford Economics. It says franchises:
- Drive 1.8 times higher sales than comparable non-franchise establishments
- Provide 2.3 times as many jobs than their non-franchise counterparts
- Pass their success on to employees in the form of higher wages and benefits and greater opportunity for advancement
Whether due to economic uncertainty or the goal of fulfilling a business ownership dream, here are some tips and tricks on how to invest in a franchise.
Step One: Understand the Concept
The popularity of franchising is born from the fact that as a franchise owner, you basically get the best of both worlds. You enjoy the dream of business ownership with a built-in safety net. There are fewer unknowns with owning a franchise compared to starting a business from scratch. The plan is all laid out for you. You have a proven business model to utilize. Your success comes from following the game plan laid out for you. Often, you may choose a franchise brand that is inflation and/or recession-resistant, which provides you an even bigger safety net, but keep in mind that there are no guarantees of success in any business.
As a franchisee, you will receive training that entails guidance in everything from the ins-and-outs of business ownership to your grand opening and beyond. Often, you need no background in the business you choose, because you will be educated by your franchisor. Certainly, it helps to have some business acumen as you’re learning how to invest in a franchise, but your training will teach you about management, staffing, and thoroughly equip you with details you need to know like licensing and insurance requirements. In addition, you will receive ongoing support, be part of a network of franchisees, and you will have a marketing plan laid out for you.
Step Two: Do Your Homework
You need to research brands. That’s a big assignment. There are thousands of businesses that franchise, from cleaning and automotive franchises to restaurants and travel and a myriad of other choices. Your job is to narrow the options. Don’t just assume big brands are too expensive or you won’t make money if you invest in an emerging brand. Different strokes for different folks—there’s a brand out there for you.
Yep, this is business, you’re in it to make money, but the brand you choose should also align with your skill set, interests, and goals. You will be tied to this business for at least a decade. Most franchise agreements last anywhere from 10-20 years, so choose something you are passionate about. Working a job you’re excited about makes every day better, and your enthusiasm will show.
Once you’ve narrowed your search, your homework will include looking at each brand for profit potential, growth in the market, competition, success rate, loss of franchise locations, perceived weaknesses, and opportunities. You also want to clearly understand how the brand makes money. Is it a recurring revenue concept? Do they upsell? How innovative are they?
Once you choose a brand, you will investigate further through the franchise’s Discovery Day, which is an opportunity for you to really get to know the brand and see if it’s a good fit.
Another tip about how to invest in a franchise is to remember that the brand is looking for franchisees that fit their criteria, too. This has to be comfortable and beneficial relationship for both parties as you will be working together for mutual success. The franchise will also be looking for your liquidity and net worth to ensure you have the criteria for potential success.
Step Three: Your Financial Commitment
You need to clearly understand your financial obligation. You will pay a franchise fee that is essentially your entry fee into the franchise. On top of that, look at the initial investments which may include construction costs, supplies, and insurance. Read through your prospective franchisor’s Franchise Disclosure Document (FDD), which outlines their financial status and relationship with franchisees. You may want to get assistance from an attorney or accountant to ensure you understand the language of the FDD as well as your franchise agreement.
Step Four: Return on Investment
Find out how long it may be before you begin seeing income. This is especially important if you have borrowed money for this investment from a financial institution, partnership, or personal loan. When choosing how to invest in a franchise, it’s often in your best interest to talk with other franchisees about their experiences and rate of return.
Step Five: What’s Your Role?
Perhaps your interest in franchising in purely for investment purposes. Those options are out there. For the most part, however, you will likely have a pivotal role in the day-to-day operations of your business. If you chose franchise business ownership over an independent venture for a better work-life balance, make sure you’ve chosen a brand that gives you just that.
Your Investment in Wild Birds Unlimited
If you are looking for a niche franchise that offers you the perks of being your own boss and maintaining a work-life balance, look no further than Wild Birds Unlimited.
In business for over 40 years, we are a wild bird franchise providing franchisees the opportunity to be part of a growing industry as nature enthusiasts are spending more time and money watching wild birds in nature. You benefit from our brand name recognition thanks to the more than 350 Wild Birds Unlimited locations that serve as a community resource for bird watching enthusiasts.
If you want to come fly with us and join our flock, get started today.