How Investing in a Franchise is Worth it

23/03/2019 18:00 | Start a business

investing franchise worth

Originally posted on 07/09/2017. Updated on 23/03/2019.

Franchising has grown in popularity in recent years and this is partly because it is considered a much safer investment than setting up your own business. Naturally, theres less risk involved; youre buying into a business with proven strategies and training and support provided throughout the franchising journey. Its easy to see why an entrepreneur would choose franchising over starting their own business from scratch - particularly when you consider that no real experience or expertise is needed to own a franchise. In fact, with so many different franchises out there, it is almost surprising that brand new businesses are launched at all.

However, there are drawbacks to the franchising game. So, is investing in a franchise worth it?

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First of all, lets take a look at some of the disadvantages to starting up a franchise.

Disadvantages of Owning a Franchise

While an independent business owner can slowly increase expenditure to correspond with earnings, a franchise owner doesnt have this luxury. From the outset, an initial investment fee is paid to the franchisor and spent on opening the outlet youve invested in.

The costs dont end there. Once the upfront franchise fee is paid, its more than likely that youll be obliged to pay on going royalty fees and contribute towards marketing activity for the brand as a whole.

You may also feel overwhelmed by the restrictions that the franchisor can put in place. The success of the brand relies on consistency across all its outlets, ensuring that consumers can recognise, trust and value the business. This means that strict standards must be adhered to. If youre the type of entrepreneur that wants to do things your way and exercise your creativity within the business, a franchise probably isnt the best option for you.

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Advantages of Owning a Franchise

When you buy a franchise, youre effectively buying a ready-made customer base. It could take months or even years for a small business to build up brand awareness, as well as considerable amounts of money and effort. In fact, spending money on costly promotional and marketing activity can often impact negatively on a business financial situation.

Another benefit of franchising is the level of training and ongoing support you receive from an experienced and knowledgeable franchisor. You cant put a price on learning from someone who has been there and got the t-shirt, and this advice can be invaluable for franchisees. Finding reliable and trustworthy information isnt quite so easy for independent business owners. Generally, professional advice can only be guaranteed if it is given through an official body, and this normally costs money.

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Whats more, statistics demonstrate that franchise businesses have a higher success rate than independently run businesses. With only 40 percent of small businesses surviving more than five years, starting a franchise should allow investors to build a business with longevity. According to the British Franchise Association, the failure rate of franchise businesses stands at 4.6 percent - much lower than that of independent businesses.

Make it Work for You

People decide to run franchises for an array of different reasons. Some people want the franchise business to be their primary source of income and intend to become the owner of several franchise businesses. Others prefer to run a business as a hobby alongside full-time employment in a different business. Once youve decided how you would like to accomplish your goals, you will be able to start to narrow down your options from the masses of opportunities available.

So, if owning a franchise business is for you, then how do you know which one to buy into?

Firstly, you should assess your skills and previous experience and consider what makes you happy. Do you like interacting with customers? Are you a natural sales person? Do you enjoy the responsibility that comes with managing others? The answers to these questions may help you narrow down which industry or type of business you are suited to.

However, you shouldnt let your lack of experience or skills in a particular area deter you if you would like to enter this field. One benefit of being a franchisee is that your franchisor will train and support you - so if you would like to reinvent yourself, you can.

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If you need inspiration, here is a list of five of the most popular franchises in the UK:

Spar

The first Spar opened in 1957 and its popularity hasnt diminished. There are now over 2,400 franchises in the UK alone.

Costa Coffee

With 2,200 franchises in the UK, this coffee shop giant is looking for franchisees to expand the business and inspire the world to love great coffee.

KFC

This hugely recognisable brand has over 800 fast food restaurants in the UK and is one of the biggest chains in the world. 95 percent of KFC outlets in the UK are franchised.

Kumon Maths

With parents keener than ever to invest in their childrens education, Kumon Maths has expanded rapidly to become the countrys largest non-food and drink franchise.

Burger King

This huge US brand serves over 11 million customers around the world every day and has made a real impact in the UK, which now boasts over 650 Burger King outlets.

Before investing in any business its crucial that you do your homework to make sure that its the right choice for you. Its difficult to dispute that owning a franchise is much less risky than starting your own small business, but it should be remembered that a franchise option doesnt guarantee success.

While you will get support throughout your franchising journey, you should be prepared to invest the same blood, sweat and tears that you would invest into your own business. If you apply the same work ethic, starting out as a franchisee is an excellent way to meet and learn from other inspirational entrepreneurs. This will not only help you build a profitable franchise business, but will also give you great experience for future ventures.

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