If you have an entrepreneurial spirit and are looking into investing in a franchise, now may be the time to do it. In 2013, Franchise Resales reported a "perfect storm" of conditions for buying franchises – baby boomer franchisees are retiring and putting their businesses up for sale. That, coupled with an improving economy and greater access to startup capital, meant a perfect opportunity for aspiring franchisees.
Since then, the franchise market has continued to rise. Ron Bender, CFE of Big Frog Custom T-Shirts & More, told Business News Daily that the franchise industry is currently in a strong place. He reported that Big Frog is currently experiencing their best year ever in regards to franchisee united economics and franchises opened.
"Franchisees are doing very well, and engagement and satisfaction are at all-time highs," Bender said. "Many new stores are setting sales and profitability records … and all are seeing benefits. The economy is strong, [and] the future looks promising."
While the franchising industry is on the rise, Steve Jackson, CEO of Hungry Howie's pizza franchise, said it's still a good idea to approach franchising – along with any business venture – with caution. [Looking for a franchise? Consider these five factors before you invest.]
"It's important to really do your research and find a franchise … that provides a robust training program to ensure you succeed," Jackson said. "If you're armed with everything you need to prosper, you'll be able to cultivate a favorable environment to launch a thriving business in any market."
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Rob Price, CEO of music education franchise School of Rock, said the state of the market and even the franchise concept has less to do with success than the actual franchisee.
"One key determinant of franchisee success across concepts and across time … is the passion of the franchisee," Price said. "Naturally, a prospective franchisee should evaluate whether they believe the franchise concept is sustainable … ultimately, the most passionate franchisee [who is involved] in a [business] concept that may be out of favor will often outperform a disengaged [franchisee] [involved] in a hot concept."
The primary advantage of purchasing a franchise is its existing business model. Instead of having to build the business, brand and customer base from the ground up, a franchise owner can rely on the company's past success to quickly market and expand his or her branch. However, opening a new franchise is often expensive, so purchasing one from a current owner can mean a significantly lower price tag.
While you're considering whether or not you want to invest in a franchise, ask yourself some questions to see if this business route is right for you. Dennis Jenkins, VP of franchise development at Money Mailer, suggested asking yourself the following questions:
- How much money can I comfortably borrow to invest in a franchise? How much working capital do I have?
- Do I have enough living expenses saved that I could live on for a year with zero income?
- Am I ready to take 100 percent ownership of a business, and do I have the work ethic to do what it takes to be successful?
- Do I have support from my spouse/significant other for taking such a large risk in my life?
- Do I want to be a franchisee part-time or full-time?
Lynn Sharp, a multi-unit franchise owner of Chem-Dry, gave Business News Daily some tips for new franchisees looking to grow, including setting aside a budget for marketing opportunities along with buying growth opportunities. Sharp also pointed out that franchisees need to follow the organization's development plans.
"Sometimes owners get distracted by unnecessary fads or 'get rich quick' methods," Sharp said. "[Franchises, like Chem-Dry,] have a business model that has been proven time and time again to work and provide results. If you follow it, you will succeed."
For more information on owning and choosing a franchise, visit our franchising guide.
Additional reporting by Nicole Fallon.