What Is Considered A Good Franchise Investment?
If you are considering making a franchise investment in your future then there are probably only two things on your mind – entrepreneurial success and financial stability. However, to achieve both then you have to choose the right franchise to begin with and that starts with looking into the return that you will get on your investment to determine whether or not the franchise income will outweigh the franchise costs.
A Good Franchise Investment
There are numerous factors that determine what would be considered a good franchise investment and what would not. However, in all senses of the phrase the return on your initial investment is incredibly important. The following all have a part to play in that respect:
- Initial Fees – Every franchise investment will require an initial fee. Some are higher than others but you should always look at the fees to assess whether you can afford it or not in the first instance, and whether it is too high to give you a chance of making a profit in the second. The latter depends on the business and also the chance you get to maximize profit.
- Ongoing Costs – Franchise costs will be outlined in full in your franchise agreement and sometimes in the literature that you request. Some require more ongoing costs than others and they can actually affect your return on the initial franchise investment. However, they vary from company to company so be sure to check out those involved with your potential investment.
- Royalties – Some franchise businesses request a royalty percentage on the amount you earn. However, you have to assess if these costs and royalties will hinder your entrepreneurial aspirations because if you cannot make a profit then it is not a good franchise investment.
- Income – How much does the opportunity in question give you the potential to earn? Are there multiple revenue streams available? Can you maximize profit quickly via promotions? Does the product give you a good return on your investment? These are all questions that you need to ask in order to assess your income level before you actually choose your franchise and sign the paperwork.
Your Investment Return
When trying to determine what is a good franchise investment and what is not, you have to read between the lines to work out the franchise income. The franchise costs are straightforward because they are outlined in advance. However, the franchise income is very different and it will not be apparent until after you get started.
A good franchise investment can offer you the possibility of a profit in your first year, and a 110% return is considered incredible. After all, most businesses do not recoup their full investment in the first year. However, you should not adopt the misguided view that the more you invest the more of a return you will get because that is absolutely not true. Much depends on the level of business and the ways in which you can maximize revenue, including how much time you are willing to dedicate to running the business. This latter factor will also have a major impact on how good the franchise investment actually is.
A good franchise investment is undoubtedly one that will bring you a stable income over the years and will quickly recoup your initial investment. You can look at past records of the companies you consider in addition to the current financials. You can speak to other franchisees and do your homework in that way. Ultimately though, a good franchise investment will give you what you want in terms of getting a foot on the entrepreneurial ladder and enhancing your personal financial position.