When people see me speak about franchising, they ask me why I’m so passionate. Well, the truth is, the numbers! While I am known to be a risk taker in a few areas of my life, I typically prefer to take on challenges with less risk and more opportunity for success. That’s why I love franchising.
Starting any business comes with risk. However, franchising does several things to mitigate those risks for those that understand the guidelines set by the franchisor to be successful. When you invest in a franchise, both money and time, the reward can be much more than you imagined.
A good candidate for franchising typically has experience in sales and/or marketing, understands the basics of operations and customer service, and is looking to be in a business they are passionate about and committed to—that’s it. But if you say, “I know nothing about hauling junk, I’m in IT”; no problem! One of the best aspects of franchising is that it enables people that have experience in one field to quickly transition into an entirely different field without needing additional education or certifications. The franchisor provides the training as a part of the program.
The other aspects of franchising I love is the flexibility that owning your own business can provide–from spending more time with friends and family, to giving back to your community. In addition, the options of what to do with YOUR business in the long run– from selling it for a nice profit, to willing it and creating an environment of generational entrepreneurship. These are two things you can’t do, when you are an employee, not to mention, it provides much needed jobs and support to your local community. The value there alone is priceless.
And we haven’t even gotten to the numbers yet! Here’s what you need to know, from the basics, to the impressive stats. This data shows why I’ve become a raving fan of franchising:
- There are over 2,500 franchise brands available in 100 industry categories. That’s right, we’re not just talking food! There’s something for everyone; senior care services, to children’s education, automotive, health and beauty, locksmith, consulting, commercial cleaning, and home improvement.
- A home-based franchise has an average investment of $50k-$70k, while the service industry and brick-and-mortar establishments require an investment of $100k and $200k, respectively.
- Since 1983, 20,000+ entrepreneurs have utilized 401k ROBS (rollovers as business startups) to access $5B+ in capital to fund new businesses. Many of those are franchise businesses.
- The average royalty rate is between 6% and 8%.
- Return on investment is between 12% and 14% for food & beverage franchises, and low 20% for the service industry (where it commonly goes as high as 32%).
- Most new businesses have a ramp up period of two to three years, so the ROI is calculated after the third year of operation. Because franchises are typically run from a proven business model, ROI is generally calculated in year two. A good ROI is 15%; for every $100k of capital you invest, you should expect to make at least $15k per year in return on the investment.
- The number of franchise establishments grew in 2015 by 12,209–1.7% over 2014– and expect 1.7% growth in 2016.
- Employment growth in the franchise sector will continue to outpace the growth of employment in all businesses economy-wide, as it has in each of the last five years. Franchise employment is expected to increase 3.1% in 2016, while total, private, non-farm employment will increase 1.9%.
- Over the six year period, 2011-2016, average annual job growth in the franchise sector, at 2.7%, will be 0.5 percentage points higher than for all businesses economy-wide (IFA 2016).
- U.S. franchisees added 20,000 new jobs in January 2016, and remained at double the pace of the labor market overall for the past twelve months (ADP National Franchise Report).
Franchising is a great way to become your own boss with a built-in support organization, provide for your family, achieve work-life balance, create a legacy, and give back to your community.
Nancy earned a degree in Sociology from UCLA with a specialization in urban studies and business. Her first business was a partnership in a small record label right out of college. After working with a few tech start ups, she concluded her career in the corporate world with 14 years at Sprint, a majority of that tenure as a director in customer and sales operations. Nancy started NValuable Franchise Consulting, in order to provide free consultation, relevant insight, pertinent and candid feedback to her clients, so they are able to confidently purchase the right franchise. As a result, her clients achieve financial independence and a positive, enduring impact on their families and local communities.