Is investing in a franchise worth it?
If you’re only thinking about fast food franchises, my answer on that subject can be found here (20k+ views):
Long story short, stay away from food.
Let’s talk about investing in franchises in general.
Is investing in stocks worth it?
Is investing in real estate worth it?
These would be equivalent questions to ask based on the long track records they all have of success and failure.
If you find the right opportunity, you’ll find franchising is the best way to own a business as you get to be your own boss or have an investment company and not be in business by yourself.
It’s a way to skip the first 5–10+ years of business ownership and avoid all of the pitfalls you wouldn’t have known. Paying a franchise fee is a way to get six to seven figures worth of trial and error and business knowledge from day 1.
There are franchises in over 100 different industries from food to fitness to clothing recycling to custom tailored suits…you get the idea.
How do you know it’s worth it?
After years of advising individuals on which franchise is the right fit for them, the ‘worth it’ factor typically comes down to two areas.
What are you looking for out of a business?
Would this be a way to diversify your 401(k) with an investment business where you manage a manager? Are you trying to do a full time change in career?
Do you want to manage a lot of employees or run a solo operation?
Is this a way to give back to the community by having a business that interacts with your city?
You really need to self-reflect on what you’d find fulfilling about a business, money aside, first or else you don’t know what you’re looking for to be worth it.
In franchising you’ll most likely be looking at industries you never considered before but will accomplish all of your other goals as long as you’re open minded.
This is usually the number one reason franchising is looked at as an investment option.
One of the first questions I’ll hear when introducing someone to a franchise concept is, “how much can I make?”
The Federal Trade Commission requires disclosure for all prospective franchise buyers and part of this disclosure is a section call Item 19 which is where they are allowed to make an earnings claim based on past performance.
This can be more detailed here:
Also remember that the amount of investment ≠ ROI, see more on that here:
The best way to find out is to actually research franchise brands that are a good fit from you. You’ll be able to hear from existing franchise owners and get to ask them if it’s worth it. If you speak to 5–10–20 owners and they all so no, then probably not. If they say yes, ask why and make sure you’d be happy in the same situation.h
To find out which franchises fit your long term goals, schedule 15 minutes with us in a few clicks.