Is A Franchise Investment Worth It Right Now?

Varying Degrees of Investment

There are currently 30 million small businesses accounting for 99.7% of all businesses in the United States alone, but only around 800,000 of these are franchise operations. While a McDonald’s franchise could set you back at least £350,000 in the UK, most franchises for small businesses offer very reasonable investment opportunities over larger corporations and can start from as little as £3,000 to £10,000 with some offering free opportunities that probably should be avoided. Established and respected websites such as Franchise Direct offer reliable and informative metrics by which you can decide whether to invest in a particular small company from many sectors.

A few thousand dollars might seem like a lot of money but considering that the average amount of savings of the over 55’s is around £20,000 and the average annual franchise income is between £30,000 to £100,000, a small investment with a small franchise might be the silver lining you need following a job loss due to Covid-19.

However, it should be noted that even an investment into a franchise is still an investment and retains all of the risks that come with any other investment type. Additionally, as a franchise owner you are expected to work very hard to achieve success and you cannot just sit back and wait for the money to come in as you would with a stock investment.

Some Can Weather a Storm Better Than Others

One of the major questions regarding the world of franchises is whether they are recession-proof. The short answer is probably ‘yes’, because they are still around and many of the types of businesses that have become successful franchises are the kinds of things that continue to sell well during a recession such as clothing, food and pet items. With that in mind, it isn’t wise to think of any business to be recession-proof as unforeseen events such as a worldwide pandemic can have a major impact on any business given the right (or wrong) circumstances.

Covid-19 has caused recession-like economies in every nation all over the world and the continued operation of specific industries has highlighted the recession-proof qualities of some business types. Courier services have reported a sharp increase in business with Royal Mail reporting that parcels outperformed letters as their biggest profit contributor at 60% in 2020, while food couriers such as Deliveroo have seen a massive increase in orders because people cannot go outside to eat.

A Humble Opinion

Whether a franchise is actually worth investing in is down to economic events, world events, local events and future predictions depending on a business, just like any other investment. Due diligence on the part of the investor is essential when making a decision that could cost you part or even all of your life savings and if you aren’t sure about a particular franchise then it might be best to pass on it or seek professional advice.

If you feel that a specific franchise might be good for you at this moment because you have lost some income or you are looking to future proof your income potential, then by all means pursue the investment with vigor and positivity but keep in mind that any investment comes with risk.

The risk of failure with a franchise is relatively low but this is ultimately determined by the amount of work you are willing to put into a business. Even a franchise such as KFC or McDonald’s won’t automatically guarantee a return or success, and research, activity and effective management will always be vital if you are to capitalise on the good name of an established and well-respected company.