The U.S. franchise economy is diverse, covering 29 industries and 226 sub-sectors of the economy. As you might expect, such a diverse economy attracts a diverse group of owners. Successful franchisees come from a variety of backgrounds, including varying levels of wealth and business experience. So you can probably find a franchise to match your situation, whether you have ample savings and business experience or are limited in one of those areas. Here are some tips to help you choose the right one, depending on your personal resources.
Plenty of Savings, Extensive Business Experience
Generally speaking, the bigger your nest egg and the more extensive your business experience, the more flexibility you’ll have. If you’re a risk-averse person in this situation, consider applying for a household-name franchise. These typically require a larger initial investment, but they come with big-time brand recognition that can quickly attract large numbers of customers. And with business experience under your belt, you’ll be able to hit the ground running and reach profitability sooner.
If you’re more risk-tolerant, consider looking for a franchisor that’s just getting started or is on the cusp of their next stage of growth. This kind of opportunity is riskier, but it often comes with special support, a larger revenue share, market exclusivity, or other incentives. Your savings and business experience will make you attractive to franchisors in this position, plus provide financial cushion and operational know-how to make you successful at building a new brand.
Plenty of Savings, Limited Business Experience
Maybe you have some business or finance experience but have never held a leadership position, or you’ve managed a household but not employees. If you have limited business knowledge, but a significant amount of money to invest, franchising can still be a great choice for your next stage of life.
In this kind of situation, I recommend looking for a franchisor with a robust support system. Robust support costs more but can help bridge the gaps in your business knowledge. Support options usually include marketing assistance, online or in-person training, a dedicated account manager, or other resources. Also consider turnkey franchises. With turnkey franchises, the franchisor takes care of most or all of the startup process and delivers the franchise to you ready to open. The business may also come with operating software or other helpful tools–perfect for someone with less experience.
Limited Savings, Solid Business Experience
If you have good business experience but limited cash, don’t give up. Your business acumen will provide what you need for long-term success–you just need to figure out how to get started financially. Thankfully, there are several avenues for lower-cost franchising. First, look for franchisors with low initial investment costs. Plenty of smaller brands and local or regional franchisors provide good returns and have startup costs of only $25-50,000. Second, look into low-cost financing. Some franchisors provide this, or you can go to the Small Business Administration. Finally, consider home-based franchise opportunities. Because they don’t require you to build out or maintain a physical location, home-based franchises usually have lower overhead, both in terms of startup costs and ongoing expenses.
Limited Savings, No Business Knowledge
This is the one situation where I would probably discourage you from franchising–at least for now. Take some time to save up additional funds and learn more about business or franchising, then revisit your goal. If you’re not sure whether you’re ready, or you need some guidance on next steps, schedule a call with me. I’m here to help!
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