Have you ever thought about how many national franchises there are across the country? With more than 745,290 franchise establishments and an estimated over 3000 brands, it’s fairly obvious they all don’t serve fries on the side.
According to Franchise Grade’s recent “Facts & Figures Report: Kings & Paupers: The Long Tail of Franchising,” which studied the franchise industry, 73-percent of franchise systems have less than 100 outlets. These emerging brands may be a great investment but without knowing about them, how can you compare them among all of the national players? (tip: work with someone who knows the industry)
If you don’t want professional help, how do you begin to choose? It’s about making the best investment for you. Here are some tips to help narrow down your search:
Profitability: Of course, for most, this is the most important factor in choosing a franchise. A franchise is an investment. If the investment is not profitable, we could be in trouble. Investigate the direct revenues and costs associated with a particular business model. In franchising, understanding all the costs associated with both the initial investment and the ongoing fees including royalties, is incredibly important. You’ll learn that the FTC has tight regulations on what the franchisor can share, but work with a pro who can help you with the right form of questioning to the owner operators in the trenches.
Fits your investment range: Your franchise obviously needs to be one you can afford. According to “The Franchise King” Joel Libava, the following two steps will give you a clearer picture:
- Create a Net-Worth Statement: Make a simple two-column list of your assets and liabilities. Add them up and subtract the latter from the former. This will give you a picture of your net worth.
- Talk to an Expert: Libava also stresses the importance of consulting an advisor. A franchise is a major investment and an advisor can help you build a picture of what you truly can afford, not only in terms of the purchase price, but also how much your down-payment should be. Did you know there are experts who devote all of their time to helping people get franchise funding? Please don’t go to your local banker and ask for their opinion – in this case, they may not know ALL of your options.
Brand equity: Does your perfect franchise have a well-known name in your city or state or are you someone who wants to “bring a brand” to the masses. A well-known brand name can equal more profits for you, but sometimes you’re going to run into territory trouble. If you want to scale the business, confirm what’s available. If you’re looking for a particular “name brand” the goal is to find a franchise with locations close to your city or within your state that is not over-saturated in your market.
There are many franchises you haven’t heard of before that can be great investments. Although they’re not national names, yet, if they show profitable locations, fit your investment range and have a following, they just might be your best investment opportunity.
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