Should You Invest in a Franchise?

Jake Michaels
January 13, 2020
7:17 am

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Franchise concept

Investing in a franchise can be profitable, and it is also a safe option for many would-be entrepreneurs. Investors do not have to start from scratch when they choose this option. They’ll just need to learn the system and implement it.

They also don’t have to research the market and audience because franchises already have a niche. This all seems nice, but before you invest, there are things to consider. Experts on how to start a business or franchise cite the following factors to consider before investing.

Can You Afford It?

Some franchises cost more than others; the big question that lingers in the minds of many investors is their cost. Assess your financial situation before making an investment. Consider many scenarios wherein you’ll make and lose money, and how long it will take to break even and then make a profit. Avoid spending all your money on the franchise; you’ll need more than enough to survive the lean times and pay for your own expenses. Get different investors so that you won’t use your savings.

Is It within Your Interests and Strengths?

Just because a franchise is profitable and their numbers look good, it doesn’t mean you have to invest in it. Understand your strengths and interests to make your investment worthwhile. A franchise may have its own processes, but it is still up to you to follow them. If the industry isn’t within your interests or expertise, you might give up along the way once you start hitting roadblocks. Create a shortlist of franchises within niches you are familiar in and within the realm of your experience. This shortens the learning curve and allows you to get creative in marketing it.

Do You Understand the Market?

You may have money to spend on investing in a franchise, but if you do not understand the market, it may not become profitable. One advantage of franchises is that you don’t have to reinvent the wheel; there are processes and research in place. However, you still need insights into the audience you are targeting. Understanding them their quirks, wants and needs will make your investment more profitable.

Are You Patient?

Famous franchises (or even upstarts) require a lot of money upfront. This investment will take time before it becomes profitable. You’ll encounter several roadblocks, challenges and your payout may happen a year or so from now. The question is, can you wait and be patient to see things through? If your answer is yes, then investing in a franchise is worthwhile.

Can You be a Good Manager?

Now that you have more than enough money, your next test is management. A system is already in place once you invest in a franchise. Overseeing each step is the next challenge. Implementation (and to some degree, getting creative with the process), is what you need to do to succeed. You’ll need experience as a manager to run the operations successfully.

These are some of the factors you need to consider before investing in a franchise. Money is important, but you’ll also need other skills to become a successful franchisee or franchisor.

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