Investing in a Franchise to Diversify Your Portfolio

There comes a time for many business owners to consider how to expand their holdings. While some are content with just one or two businesses in their portfolios, others like to have a broader range of investments, whether it’s so they don’t have too many eggs in a single basket, so they can try their hands at new industries, or just so they can improve the returns on their investments. Whatever your reason, investing in a franchise is a good way to add to your portfolio while making secure and sound use of your funds.

Thousands of Investors Choose Franchising

If you have doubts about the viability of franchise ownership as an investment, let’s take a look at some of the statistics. Market research shows that in the U.S. alone, there are about 750,000 individual franchises, employing close to eight million individuals. Experts also note that franchisees can make tens of thousands of dollars in annual profits from a single, although exact amounts will vary between industries, brands, locations, and based on other factors.

The Benefits of Franchises

There are a number of noticeable benefits to franchises over other business models. Let’s look at some of the most common upsides to franchise ownership.

1. Franchisees aren’t in business alone. As a franchisee, you’ll have a partner in the form of your franchisor. While independent business owners have to either hire consultants for advice or figure out their own problems, you’ll have access to experienced industry experts through your franchisor to turn to for advice if and when you need it.
2. Franchisors provide support services to their franchisees. Not only do franchisors provide you advice for running a location with their brand name on it, they’ll also provide services like marketing, advertising, and certain administrative services to help you run the business, which you’d otherwise have to take on yourself.
3. Franchises have a proven brand. This comes with a number of attached benefits, such as a pre-existing customer base that patronizes your franchisor’s brand, the wider reputation that comes with the brand name, and the ease of financing that results from opening a new location for a proven brand with a proven concept.
4. Franchises are easily scalable. If one location proves successful enough for you to want to expand, opening additional locations is much easier than trying to do so with an independent business.

The Challenges of Franchising

Of course, investing in a franchise has some hurdles to jump. As you considering becoming a franchisee, make sure that you’re ready to take on the challenges that many franchisees face, including the following:

1. Franchisees have certain obligations to their franchisors. When you sign an agreement with a franchisor, there will be conditions you’ll have to meet in the operation of your location. If a franchisor thinks you’re not living up to the brand’s reputation and aren’t operating within the company guidelines, the franchisor may terminate your agreement.
2. Opening a franchise location can be expensive. While it varies from brand to brand, the most widespread and famous franchises can carry a hefty franchise fee, which is an initial fee charged to open a franchise location. Even after this, you will need to pay royalties and other sums to your franchisor in exchange for the support services provided.
3. A brand’s reputation can affect your own. This is both a positive and a negative trait of franchises. When a brand has a good reputation, you benefit from the association. However, if a brand develops a bad reputation through even a single “bad apple”, it can hurt your business as potential customers are wary to trust your location won’t have the same problems.

Franchises as Passive Investments

You may be looking to invest in a franchise as a means of getting passive income. The good news is there are franchises out there which can make good sources of passive income. The trick is finding the right franchise for this purpose. Many franchises are hands-on in their management requirements, needing somebody to oversee the operations. You can hire a manager to handle the day-to-day work being done, but you will likely need to provide at least some oversight and long-term, big-picture guidance.

One thing to keep in mind is even for the most low-maintenance franchise, some initial work will be necessary to get things started. Getting a passive income-generating franchise established can mean hard work up front to set up a system that’s easily run by managers and other staff.

Good Qualities for a Quality Franchise

One important quality to look for in a franchise is a recession resistant concept. You want to find a franchise with high demand for its goods or services, even during difficult economic circumstances. All franchisors provide their franchisees with training, but it’s helpful to find one that doesn’t require you to already have a lot of specialized training. Scalability and potential for growth are also strong qualities, since adding locations or expanding staff to cover a larger customer base will allow you to get greater returns on your investment. Finally, a solid cashflow is important to ensure your able to cover all your expenses.

Invest in Your Future with ProSource Wholesale

Adding a franchise to your business portfolio can be a winning decision if you partner with the right brand. ProSource Wholesale has over 30 years of success to show we’re a sound business to join.

We’re a wholesale home improvement franchise dedicated to providing professional home improvement contractors with the materials they need to get the job done. As a franchisee, you won’t need to worry about installing products, because we sell to professionals. Our membership business model allows our members access to showrooms at times convenient to them, which means you won’t be shackled to regular business hours to manage your location. You’ll work together with your showroom staff, vendors, and members to provide quality home improvement materials and products, including floor covering, cabinets, countertops, and more.

Find out more about how ProSource Wholesale may be the right franchise investment for you by submitting a franchise form today!