If you have money to invest in a new business, you may be struggling to find a reliable, profitable venture to invest in. Or, you may have an existing business that has hung on so far but faces serious challenges.
In an ordinary year, according to the U.S. Bureau of Labor Statistics, around 20% of startups fail within the first year — and nearly 50% close down by the fifth. The pandemic has meant that even more small businesses have lost significant income or closed.
Larger businesses have done better. They have been in a position to take advantage of low-interest lending programs and to negotiate with landlords, vendors, suppliers and customers. They often have more capital on hand to cover for hard times.
Yet you want to invest in a startup, not stock. Even now, a successful startup could bring you many times the return on your investment than you could expect in the stock market. Perhaps you want to start your own business and reap the rewards of your hard work.
One way to take advantage of the deeper pockets, stability and resilience of a larger company while still seeing some of the rewards of an independent business is to invest in a franchise or convert your existing business to a franchise.
Benefits of being a franchise
Franchise owners get help with technology, advertising, marketing, business operational protocols and crisis planning. Often, the franchisor can offer expertise in regulatory compliance and dealing with government inspections. The ordinary independent business owner is on their own.
Franchisees start out with major national advertising and name recognition. You have a leg up on getting new business through national alliances and partnerships, too.
If your business can be converted to a franchise, you could enjoy lower costs due to the power of volume purchasing.
Is franchising for you?
Whether you have an existing business you want to convert to a franchise, or you want to invest in a new franchise opportunity, there are a few questions you should consider.
What is the potential for profitability in this environment? Keep in mind that some businesses have succeeded and even grown during the pandemic.
Would converting reduce your expenses? Would it increase your potential profitability?
How much capital will you need to begin? If converting, you will need to change your signage, logo, trade dress, website, email, and probably the technology you use. You may need to renegotiate existing contracts.
Buying or converting to a franchise could allow you to build or stabilize your business, even in this challenging market. However, you will need sound business counsel to take advantage of this opportunity. Talk to your business lawyer about franchising opportunities today.