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How To Invest In Franchises: Which Franchises are Most Profitable?

The sad fact of life as reported by the U.S. Small Business Association is that only 2/3 of new businesses starting up can survive within the first two years of operations, and barely half make it through the fourth year. Franchising has always been considered as a viable alternative to owning an independent business not only to limit the inherent risks but also to secure support when needed. How to find a great franchise opportunity thus becomes the first step toward ownership of your business while learning the discipline required to alleviate the odds of failure.

Experts have long suggested that the best time in invest in a franchise is right in the middle of a recession, like the one we are in presently.

Hard times began in 2008 and most if not all of the excesses have been wrung out of the economy, and although no one is calling for an upturn yet, business cycles have always been true to form, and eventually economic expansion will start occurring.

2012 may well turn out to be a good year to begin the process of laying down a solid foundation for your future business success when the recession ends and the learning curve has been fulfilled.

Credit is beginning to show signs of loosening and after the 2011 franchising growth rate remained basically flat, International Franchising Association CEO Steve Caldeira is projecting job growth of 2.5% and economic output growth of 5% for 2012 and possibly beyond.

He also foresees particularly strong growth for industries such as health care, business and personal services, as well as automotive.

Franchising experts are also noticing an emerging trend, as former co workers or even strangers partner in the purchase and operation of franchises. Shareafranchise.com was thus launched in June 2011 by Darwin Ramon to facilitate such partnerships.

Commercial space is furthermore still readily available at advantageous terms and the market remains a tenant’s market, although economist Lawrence Yun of the National Association of Realtors expects some firming by the coming year.

Finding good franchise opportunity depends on some factors that need extensive research:

  • Potential industry growth: Some franchisors provide insight into this area; however, personal research can still add perspective, especially at the local level, where saturation may have already occurred, even within a hot industry.
  • Importance of unit growth: A rapidly expanding franchise portends strong future revenues, whereas an elevated level in the attrition rate can point to slow or even declining growth.
  • Franchisor support:  Strong support and commitment from the part of franchisors is always highly desirable, and interviews with current or past franchisees will give insight into this area.
  • Pertinent management: Consider the combined experience of the management team and assess if the experience is relevant to the business in question
  • Marketing and advertising: The brand always needs to be reinforced in the minds of consumers and the franchisee is paying for part of the advertising budget anyway.
  • Financial condition of franchisors: Dose the franchisor practice sound financial management? Are the financial resources adequate for growth?
  • Honesty and suitability: The manner that the franchisor responds to inquiries will be indicative of how franchisees are treated. How well the business matches your skills and expectations will tell you if your business will thrive in the future.

You can also go through franchise directories for various choices  related to industry you are looking for,  just make certain that the business is something you would love to get into, and success will likely follow.

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