You’ve decided you’re ready to invest in a franchise; you’re up for the challenge of owning your own business and taking the plunge into business life.
But before you take the plunge, you’re still unsure if your investment will weather any potential economic storms. While any new business venture has the possibility of failure, the franchise industry has proven to be a good investment during tough times.
According to the British Franchise Association, the franchise industry contributes roughly £17 billion to the country’s economy annually, and employs around 710,000 people — up from 89,000 in 2015. Additionally, research by the association finds that “around 90% of franchisees – who own and operate their business using the brand, systems and support of a larger company – have reported profitability annually for over 20 years running.” This article, written in collaboration with F45, details the reasons why buying a franchise is such a good business opportunity in 2019.
Franchisees receive an enormous amount of support from dedicated funds, local banks, and franchisors due to the profits and growth trajectory that the business model shows. Consumers still buy products and services during poor economic times, and franchises have the benefit of a larger name with an established history that people are willing to trust more when money is tight.
Therefore, profits either remain the same or continue to increase, making the risk of lending money to franchises a less risky business than lending money to a startup that has no immediate traction and isn’t instantly recognisable.
When a franchisee opens a new location, it’s beneficial for him or her to be backed by a large, recognizable name. Franchises have reported a profitability rate of 90% within the first two years of opening, while independent businesses have reported a profitability rate of 50% within the same time frame.
This means that while 50% of independent business do see a rather quick turnaround in profit, another 50% don’t. This rate is much higher for franchisees. The franchise business model has proven remarkably resilient and successful in its formative years.
Related: Should You Run a Franchise Business
One of the reasons for this is that while franchisees may not have the original idea to start up their own private business, they have the skills to manage and run a new business, and are backed by a larger company with financial resources and a trusted name.
The franchise business model offers a year-on-year growth rate second to none. This is not only due to the large-scale visibility of the brand, but also the relatively low business costs (including startup, operational, and the cost of products or services).
While consumers do still buy products or services during tough times, they will often reduce their spending or opt for cheaper alternatives, which is where numerous franchisees can step in and thrive. For example, second-hand stores and takeaway restaurants can offer franchisees cheaper overhead costs while still allowing consumers to go about shopping for clothes and buying food.
Fitness franchises such as the F45 training franchise do the same, offering relatively low startup costs, while giving members an experience that proves value for money.
If you had any doubts about the sustainability of the franchise business model, those doubts should be fading now. While any business could become profitable under good management and leadership, a franchise has an advantage over an independent business from the get-go. From financial support and resilience to relatively low business costs, the franchise model is a good investment choice despite economic uncertainty.
Source: BM Magazine