Starting a business from scratch is like sailing on a vast ocean with no map, navigation crew, or tools. 

Picture yourself alone in a vast ocean, thousands of miles away from the nearest civilization. Whichever direction you sail in has something unique in store for you: a lost island, a jungle with dangerous animals, new civilizations, etc. You’ll have to deal with the outcomes of whatever choice you make.

Now, consider yourself sailing across the same ocean, but this time, you’re not alone; you’re captaining a well-designed ship built by experts, equipped with the most advanced navigation systems, a trained crew, and a map of proven sailing routes. 

Backed by your trusted crew, sailing equipment, and mapped routes, the journey to your destination still poses risks, but it will be less perilous, more predictable, and have a higher chance of success. That’s what you get from investing in a franchise. 

Investing in a franchise is pretty similar to sailing on that expertly crafted ship with a seasoned crew and reliable navigation systems. You’re not starting from scratch; instead, you’re tapping into a proven business model that’s set up to maximize your chances of success.

This doesn’t translate to a risk-free business venture; you’ll still face the highs and lows, like new market trends and local competition, similar to sailing through storms and bad weather in our earlier analogy. 

However, what franchising does is that it equips you with the necessary tools to weather the storm. In this article, we’ll explore why investing in a franchise might be the smartest move you make and enlighten you on some of the benefits of franchise investment.

How Does Franchise Investment Work?

On the surface level, the concept of franchise investment sounds pretty basic, but there are a lot of requirements and processes involved in investing in a franchise. Here’s how it works:

1. Research and Choose a Franchise

As a franchisee (franchise investor), you have a vast assortment of franchises to choose from. However, you’ll need to narrow down your search to franchises that fit your budget, interests, and goals. Researching potential franchise partners can be daunting; luckily, here’s curated a list of the best franchise opportunities according to industry. 

2. Pay the Initial Franchise Fee

Once you’ve locked in on your preferred franchise, it’s time to pay a one-time franchise fee. According to the SBA, the initial franchise fee ranges from $20,000 to $50,000. This fee acts as an access card giving you access to the brand’s name, model, and proprietary systems. 

3. Cover Startup Costs

Startup costs are typically covered by you, the franchisee, and these costs vary based on several factors, but they typically range from tens of thousands to millions of dollars. 

4. Sign the Franchise Agreement

At this stage, it might be in your best interest to have a lawyer review the agreement you’re about to sign. This will ensure you’re getting the most favorable terms that don’t infringe on your rights.

5. Partake in Training and Support

Each franchise has proprietary systems that are unique to its brand. You’ll need to get familiar with these systems before launching your business. If it’s a restaurant, you’ll need to learn recipes, customer service, marketing campaigns, etc.

6. Launch and Operate the Business

At this stage, your franchise is primed for takeoff. You can now open your franchise location, hire staff, serve customers, and manage the daily operations of the business while adhering to the guidelines and proven systems of your franchisor.

7. Pay Ongoing Royalties

Once your franchise is up and running, you’re required to remit royalties to your Franchisor. Similar to all the costs we’ve discussed earlier, franchise royalties vary according to the franchisor. They typically range from 4% to 12% of your revenue. 

Key Benefits of Investing in a Franchise

There are tons of pros involved in franchise investment. The following are some of its primary benefits:        

1. Proven Business Model

Investing in a franchise eliminates any trial run or guesswork usually involved in starting up a business. With a franchise, you’re provided with a system that’s been tried and tested, adjusted, and proven to work.

For example, a franchise like McDonald’s provides its franchisees with detailed operational frameworks that include pricing, inventory management, staff compensation, etc.  

Franchising helps you focus on executing your business idea and scaling it to your preferred level while relieving you of the stress involved in the inventing or development process.

2. Reduced Risk

The fear of failure has scared countless entrepreneurs from pursuing their dreams. Let’s face it, no one wants to see their dreams and money melt before their eyes because of a failed business venture. 

Starting a business comes with risks, but with franchising, those risks are significantly reduced. Take a couple of steps back to our sailor earlier on, both sailors undertake significant risk sailing the vast ocean, but the one backed by a trusted crew will always have a higher chance of reaching their destination compared to the lone sailor.

Starting up a business backed by a franchisor with loyal customers and proven systems maximizes your chances of succeeding while exposing you to the lowest risks.

3. Brand Recognition

In some slang, you can call it “street cred,” translating to credibility in the streets. Investing in a franchise gives you a lot of street cred because you’re not just establishing a business, you’re joining a brand that customers are familiar with and trust.

The reputation of your franchisor extends to you automatically, allowing you to attract loyal customers who don’t need much convincing to patronize you. Sighting the brand name alone does all the marketing for you. 

4. Easy Access to Financing

Banks and lending institutions tend to look favorably on franchises; they’re seen as low-risk investments because such brands are already established and possess a financially strong track record. 

If you’re seeking financial assistance from banks while under the umbrella of an established franchise, your chances of getting funded are very high compared to an independent startup.

The capital provided by such financial institutions can help you cover startup costs, allowing you to bring your business idea to life without putting much of a burden on your wallet.

5. Top-notch Support and Training

Franchisors usually provide regular support and training to businesses registered as franchisees. You’ll receive extensive training on the tools and techniques needed to make your business a success. 

Summary

Investing in a franchise is a low-risk, potentially high-reward strategy for becoming an entrepreneur. Backed with a trusted brand, expert support, and a proven system that’s designed for you to win, you’re not building from the ground up; you’re stepping into a dream with a wide safety net.

Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or business advice. Every investment carries risks, and individual results may vary. It is strongly recommended to conduct thorough research and consult with a financial advisor or legal professional before making any investment decisions.