The cost of franchising is often a smaller investment than the cost of setting up even one new outlet. After paying the cost of the franchise program, the remaining expansion costs (as well as most of the risk) are borne by the franchisees. And since franchisees typically pay the franchisor a fee and royalties upfront, the right strategy for selling your franchise idea can turn into an immediate, high-impact, low-risk stream of income.
The fixed and variable expenses involved in running a franchise business are much lower than operating a similar number of company-owned facilities.
You probably already know how much you would pay to set up a new company-owned copy of your existing business.
If you own a restaurant, for example, the cost of buying land and construction, or even the cost of improvements and furnishing an existing building, could easily range from $100,000 to $200,000 or more. What you may not know is that for the same amount, or less, you can have a complete franchise development program. And while the new business-owned unit may take a year to set up and might not be profitable for another year or two, your franchise program will likely take less than a year to put together and allow you to sell franchises at the end of that period. . and immediately begin to recover your investment. If your franchise fee is $35,000, an average today, and if in your first year as a franchisor you sell seven franchises (another average for franchisors according to a DePaul University study), you could have your program paid for by the end of that year. first year. year.
Some companies are waiting out this economic storm, while others are positioning their companies to succeed despite the recession. What are you going to do with your business? Are you going to take the imitation to expand despite other companies failing around you? How can you capitalize on what you know without having to expand organically with your own money? You need to leverage your intellectual property. Franchising may be the best and only option you should consider.
With all the highly-skilled people out of work, franchise companies are taking advantage of the largest supply of highly-educated people they’ve ever seen. Since unemployment is expected to continue to rise over the next year, this opportunity will continue for a while. However, once this recession ends and companies stop laying people off and start hiring them again, you may have lost the opportunity to sell franchises in this fertile environment.
The fact is that people have lost faith in what have been accepted as “safe” investments. Despite losses in 401k and home values, people still have money they can access. They also borrow from friends and family who can contribute to a new business venture, which has always been an avenue to finance a new venture. This will not be subsidized, regardless of the economy.
The challenges of today’s economy may have created the “perfect storm” and the best opportunity to franchise your business. The only real fear would be that a competitor would take advantage of this opportunity while you sit and wait.