This is Why a Franchise is a Good Investment

Many people wonder if franchising is a good investment. I’ve been in the franchise industry for more than 35 years, therefore, I believe that franchising is a great investment. 

• It’s just that franchising is not for everybody. 

In this blog post, we’ll review why franchising is a great investment and how you can make sure you are making the most return out of that franchise investment.

The two parts of businesses

Here at The American Franchise Academy, we conceive businesses in two parts:

1. The brand is the first part, which includes the product, the service, or what you sell in return for the customer’s money.
   It has to be a good enough brand so that people are willing to exchange their hard-earned money in exchange for your product or service.
   It also implies the service processes, the image, and the marketing that is produced by that brand. 
2. The management systems are the second part of the business. This includes how you get profit out of the business’s revenue. 

Franchising solves the first half of a business problem, which is having a brand that somebody created at some point in time, and that was proven its viability in the market to produce a successful business.

• But there’s an awful truth. You could have a great brand, but if you don't manage it well, then you will not make a profit.

That's the other part of the business that the franchising model does not solve. 

Buy a franchise or open an independent business?

Why is investing in a franchise an excellent investment even though it only solves half of the problem? Because this single part requires a lot of very specific, specialized skills. 

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Let's think of a restaurant. If you want to have a successful brand (which means, as we reviewed before, the product, the service, the image, and the marketing), you need not only to be a great chef but a great commercial chef. 

As for the product, the menu you design has to be produced in a repeatable and uniform way, and have the same portions, image, and taste every time. This way, whatever plate the customer eats will look and taste just as before on their next visit.

In terms of the service, how you serve the plates, the greeting, and the whole experience around your brand has to be consistent.

To do all these, you need to have the skills to develop processes and procedures, training materials, and job aids, to train your team and be able to repeat those processes over and over and over.

You also require a great image. This implies anything the customer sees, touches, and smells within the brand. So it's not just about the product, but the employee’s uniform, the restaurant’s layout, the types of tables and sitting, and the decoration. 

So, you need to either be a great designer or have the money to hire a great designer to create the ambiance that you're looking for, that will go with your menu and with the type of service and experience you want to provide. 

Then you need the ability to understand the technology behind running a business that helps you deliver the product, the service, and the image. 

• A franchise solves all these problems when it comes to revenue. 

So unless you are very creative and have the necessary set of skills to produce a brand that customers will like to give you their money, you would have to hire chefs, builders, designers, and all kinds of experts to create that brand that customers want.

That is why I believe the franchise is a great investment! Instead of spending hundreds of thousands of dollars to try to come up with the right brand, in a franchise world, you pay a franchise fee, sometimes between $10,000 to $30,000, to access a proven and successful brand that already has hundreds or thousands of units and existing customers. 

Not only that. You also obtain all the tools, procedures, manuals, and jobs you need to duplicate that brand and train your team so that you don't have to worry about the brand. 

What about the other part of the business?

Buying a franchise is not enough because you are acquiring the brand, not the success.

If you truly want to be successful, you need to master the other side of the business, which is how to get revenue and make money from it. And that is why we call it the business system side.

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This part also entails the understanding of how to manage your financials as well as labor costs, product costs, and all of your expenses, how to negotiate prices, how to make sure that nobody's stealing, and how to make better financial decisions.

All of that part is how you make a profit. That is the business management part of the business. 

Must read: How Much Profit do Franchises Really Make?

Luckily, this is something that you can learn to have a much better possibility of success. And that is why I believe that buying a franchise is a good investment because it solves half the problem of a successful business so you can then focus on the other part, which is how to make money.

If you want to learn more, we have quarterly webinars to educate people on what is franchising and what systems you need to create to be successful. 

• Register for free for the upcoming webinar at www.Multiunitsucess.com and discover what it takes to be a successful franchisee! 

Make the best out of the franchise you invested in and put your systems in place so that your managers and leaders can make the most profit they can. 

I hope these gave you a little bit of perspective on why franchising is a great investment. If you have any comments, contact us!

And don’t forget to follow us on our social media (Facebook, Instagram, LinkedIn), and subscribe to our YouTube Channel to get information like this that hopefully will help you be more successful in your business.

Reflections:

• Do you have the set of skills to create and operate an independent business on your own?
• Are you prepared and educated enough to understand the financials of your business? 
• Do you have your business management systems in place?
• Are you generating not only revenue but profit so you can fulfill your business goals and personal dreams?

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