For those looking to make a post-retirement investment, franchising can offer an attractive way to generate income and build something for the future. But getting the most out of a franchise opportunity requires a deep understanding. Here we answer some of the most frequently asked questions about franchise investments.
What is a Franchise?
A franchise is a business which is owned and operated separately, but which pays an initial fee and then a percentage of its turnover (royalties) to a franchisor in exchange for the rights to use their brand, products, services and business model. The franchisor provides a set of rules and regulations, as well as ongoing assistance and support with marketing, training and resources —all designed to help the franchisee succeed.
What are the Benefits of Investing in a Franchise?
Investing in a franchise offers a range of potential benefits, including the ability to operate a business without the need to start from scratch, and the advantage of being part of an established brand with built-in customer recognition.
A potential investor will often also have access to training and support from the franchisor, and will benefit from existing agreements with suppliers of products and services. This can provide a quicker and easier way of setting up a business.
What are the Risks Associated with Investing in a Franchise?
The biggest risk associated with investing in a franchise is that the franchisee may be held to a set of rules and regulations which they are unable to comply with. This could lead to failure, or the franchisor not allowing further agreements.
Additionally, the franchisee may face difficulty in competing with existing franchises that have been operating in the area for a longer period of time. If the economy takes a downturn, a franchise business can be at more risk than similar independent businesses.
How Much Does a Franchise Cost?
The cost of a franchise can vary significantly depending on the type of business, the location and the franchisor. The total cost can include the franchise fee (which is paid to the franchisor for the rights to use their brand and operate the business), ongoing fees and royalties, and start-up costs such as training, equipment, staff wages, marketing and other expenses.
On average, the total cost of a franchise may range from around $50,000 to $500,000, depending on the franchise. Some franchises may offer financing packages to help spread the costs.
What Should I Look For in a Franchise Opportunity?
When assessing a franchise opportunity, it is important to look at a range of factors, including the expected return on investment, the length of the franchise agreement, the franchise fees and royalties, and the level of support offered by the franchisor.
It is also important to research the company and the industry, and seek advice and guidance from experienced franchise experts. It is important that a potential franchisee has a clear understanding of the risks, costs and obligations of investing in a franchise.
Are There Any Grants Available For Buying a Franchise?
There are a range of grants available to help potential franchisees acquire a franchise business. The SBA, U.S. Department of Labor, and other federal and state agencies offer grants and loan programs aimed at helping entrepreneurs start or expand their businesses.
In addition, some franchisors offer their own grants and incentives to potential franchisees.
How Do I Find Out More About Franchises?
The International Franchise Professionals Group (IFPG) is a membership-based franchise consulting network, with more than 1,300 franchisors, franchise consultants and vendor members — each of whom can provide information and advice about franchising.
Additionally, the Franchise Industry Council provides resources, publications and research covering all elements of franchising.