What Franchise Should I Buy [WORK]
Not only are franchises more likely to succeed than traditional businesses, but franchising is becoming a more popular route to business ownership. The International Franchise Association (IFA) released its annual report, which anticipates franchise growth of 2.2% in 2022.
what franchise should i buy
The additional revenue stream for parent brands (franchisors) is a huge incentive for offering franchise opportunities, and the improved technologies and supply chain logistics have made it easier for brands to scale franchises.
Franchises only work because the franchisor has garnered enough brand equity or other proprietary value to pass on to other locations. The act of franchising involves scalability, and franchises need explicit support from franchisors to succeed.
Taco Bell currently sits atop the Franchise 500 list, but would it still be the most profitable franchise if every entrepreneur opened a Taco Bell? Even more importantly, would you feel excited or passionate about running one?
Choosing the best franchise is about finding the right one for you within the market you intend to operate. Because every situation is different, consider the following questions when deciding which franchise is best.
The World Travel and Tourism Council (WTTC) projects the travel industry to rebound to pre-pandemic levels in 2022. This is great news for travel agencies like Cruise Planners. Founded in 1994, this travel agency brand has grown to offer more than just planning cruises. If you own a Cruise Planners franchise, you own a full-service travel agency as an American Express Travel Representative.
If bringing joy to your community sounds like a fun business, you may be the perfect franchisee for Card My Yard. Best of all, you can own one with an investment of less than $10,000. As a Card My Yard franchise owner, you get access to a turnkey eCommerce website, ongoing training, and marketing collateral.Learn more about owning a Card My Yard franchise 404.
As a Lendio franchise, you will gain access to a robust network of lenders, proprietary technology, and continued support from industry experts. Additionally, you get to help small business owners fuel their dreams.
While opening a Taco Bell is not cheap (they have a $1.5 million net worth requirement), if you do open one, you stand to benefit from one of the most powerful franchises in the country. In fact, some estimates have Taco Bell owners earning between $80,000 and $100,000 annually.
There is no way to guarantee profits to prospective franchisees. However, there are plenty of opportunities that can provide consistently high profits to those willing to research the right opportunities for their market and work hard to grow their businesses.
There are lots of franchises that offer franchise fees around $10,000 or less. However, overall startup costs often exceed this amount. Home-based franchises are often the least expensive to start. A few examples include JAN-PRO, Dream Vacations, and Jazzercise.
But you may not know that many hotels and motels across the country are franchise operations, as are many service businesses, such as The UPS Store and H&R Block, and retailers, like Ace Hardware or 7-Eleven.
In other words, franchising is a very popular business model. According to Statista, about 792,000 franchise establishments in the U.S. are ringing up $827 billion in sales annually and employing around 8.5 million people.
Franchising is a way of doing business where the business owner/s, called franchisors, sell the rights to use their system of doing business, including their name, logo, policies, procedures, and an operating manual, to an individual or group of individuals, called franchisees, for a contracted period. Then, you can renew your contract and maintain ownership when that time is up.
In exchange for your initial franchise fee and ongoing royalty payments, you also get access to their marketing expertise and advice, product sourcing, initial training, ongoing support, and more when you buy a franchise. But, perhaps most important, owning a franchise gives you, in most cases, almost instant brand recognition.
Unlike independent businesses, you have to pay a certain percentage of your sales (not profits) to the franchisor. So before you start your research, determine (perhaps with the help of your accountant) how much you can afford to invest in a franchise opportunity.
If you have some experience in the industry, you may want to contrast the costs of starting a similar business from scratch with buying a franchise. Make sure you include the benefits you get from buying a franchise, including ongoing support, brand recognition, marketing assistance, and more.
Brand recognition is a big part of what you're paying for as a franchisee. However, well-known brands come at a cost. Fledgling franchisors, on the other hand, typically have lower startup costs, and getting in on the ground floor has its benefits. You'll need to assess whether the higher price of a well-known brand is worth it and whether a new franchise has enough name recognition and experience to help you succeed.
Some companies require you to sign a long-term commitment. Are you prepared to commit to working with this company for 20 years or so? Is there an option to sell your franchise? Will the company buy it back?
Linda Fong, the owner of FASTSIGNS Oakland, was able to purchase space for her business by utilizing the SBA 504 Program. Linda started her FASTSIGNS franchise with her husband in 1995. They were drawn to FASTSIGNS, a provider of visual communication solutions, because they were attracted to the idea of using their hands and creating products.
The Small Business Administration (SBA) understands the uphill battles that business owners face. Conventional financing can be hard to come by and is not ideal for many franchise owners. The SBA has established affordable and accessible loan programs, such as the SBA 504 Loan to aid the growth of small businesses. For those looking to leave the leasing lifestyle behind and became a property owner, the SBA 504 loan is the best way to accommodate this next step.
Most small businesses are eligible for a 504 Loan and this applies to franchises as well. You must be a for-profit business operating in the U.S. and occupy at least 51% of your acquired building. Your franchise must be listed in the SBA franchise directory, which currently includes over 2,500 brands.
Chances are, if you've thought of striking out on your own and starting a business, somebody has suggested that you buy one. Odds are also good that someone you also know has urged you not to buy a franchise.
An individual can buy into the franchise, often spending hundreds of thousands of dollars to run a UPS Store, a Domino's Pizza, a Gymboree, and so on. The franchisee then pays an ongoing franchise royalty fee out of its sales to the corporation, such as the Wendy's International headquarters, or the Ace Hardware Corporation. Whatever's left over, and hopefully it's a lot, the franchisee keeps.
1. You want to work for yourself. As Joel Libava, a franchise consultant who runs TheFranchiseKing.com, says, "Becoming a franchise owner is a great way to avoid ever having to deal with a tough job market ever again."
2. You're excited about hard work. Many people buy a franchise expecting a "business in a box." The misconception is that you open the doors, customers will come, and it'll run itself. There's no guarantee that will happen, though, especially if the brand name isn't one that everyone is intimately familiar with.
"You need to be motivated and willing to put time and energy into your franchised business, to make your investment pay off, and you must follow the franchisor's system down to the letter," says Cheryl Babcock, director of the International Institute for Franchise Education at Nova Southeastern University in Fort Lauderdale, Fla.
3. You don't want to take too much of a risk. The advantages of going into franchising, says Babcock, are that you have the "experience of the franchisor and the system's established franchisees who can guide and support you."
1. It is expensive. You might have some great experience in managing a business, but unless you have deep pockets or stellar credit and can get business loans (or perhaps a wealthy partner who can pony up the cash while you do the rest of the work), buying a franchise is next to impossible.
In 2004, Robert Saunders and with wife, Tinamarie, now 56 and 47, bought a UPS Store in Long Beach, Calif., while they were both still employed at Southern California Edison, where they continued to work while their staff kept their business humming; during the weekends, evenings, and vacation time, they worked on their UPS business. Because they didn't have the money outright to buy the UPS Store, they took out a $150,000 Small Business Administration (SBA) loan to buy into the franchise. That still wasn't quite enough: They also had to borrow $50,000 from their house and 401(k).
Their experience is typical. Franchises can cost as low as tens of thousands of dollars to a little north of a million, which is what anyone buying a McDonald's can expect to pay, or even more (a Denny's will cost you $2 million). Why are these businesses so expensive? You're paying for everything from leasing commercial property to buying inventory and equipment to paying the one-time franchise fee, which gives you permission to use the franchisor's signage and logo. For comparison's sake, Subway's franchise fee is $15,000. Mr. Rooter, the plumbing service, has a $29,500 franchise fee. You'll also pay the corporate office an ongoing royalty fee every year, which is essentially a percentage of your business's sales, and you may have to contribute to a marketing fund.
In 2009, they closed their business, five years in the middle of a 10-year contract. After UPS adhered to its formula for franchisees breaking contracts, the couple wound up paying a fee of $23,000 to their franchisor. 041b061a72