Is Franchise A Good Investment

Is franchise a good investment
Is franchise a good investment

Table of Contents

Are you planning to invest in a business but confused about taking a franchise? It is quite normal to think about whether your investment option is good or not. And we are here to help you in making a decision.

Whether you are making the right investment or not depends on two factors: the industry and the way you enter the industry or the way of starting a business.

We have evaluated both of these factors in this blog. You can decide whether you are choosing the right industry or not. Also, you can decide whether it is good to enter the industry alone or invest in a franchise.

So, let’s start:

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How To Decide An Industry Is Good Enough To Invest

Factors that decides whether an industry is good enough to start a franchise business
Factors that decides whether an industry is good enough to start a franchise business

Level of competition

Mainstream industries often look lucrative. You might also wish to enter a popular industry. While there is nothing bad in doing so, you should ensure that it is a well-planned decision and not an impulsive urge. Because such industries usually have endless competition.

It is not easy to survive and grow amid heavy competition. You will have to compete with industry giants and hundreds of small businesses. Hence, choose an industry with a low level of competition. One such industry is the laundry industry. It is still in its growing phase, you can definitely consider it if you are looking for less competition ahead.

Growth potential

Everyone wants to see growth in their business quickly. If you want your business to grow fast then you should choose an industry with higher prospects of growth.

You should observe whether the industry has a strong consumer base or not. Other than this, you should analyse growth potential during a recession as well. The world has recently seen the worst pandemic (Covid 19) recession. Considering it a lifetime lesson,  check whether your industry will grow or sink if a recession occurs.

Return on investment (ROI)

While talking about a good investment we cannot ignore ROI. Being a beginner, you should prefer an industry which can offer high returns on investment and high-profit margins.

Let us explain this with the help of our example. While entering the laundry industry we never did cost-cutting because we never wanted to affect the quality of our services. We invested in Swedish and American machines, German chemicals, manpower training and various other things. Even after incurring so many expenses, our profit margins have always been high. Tumbledry has successfully become India’s largest laundry and dry clean chain within just 3 years.

This shows that if you work in the right way, the laundry industry can help you gain a high return on investment. You can also enter such industries.

Required expertise

Before entering any industry, you should understand how businesses operate in it. Do your own research to see what level of expertise is required to run a business. For example, if you are joining a diagnostic lab franchise, you must have some basic knowledge about the healthcare industry. You will need some experience or expertise in your business niche.

Even if you plan to delegate your responsibilities among employees, it is crucial to be well-versed in the basics of the industry. Because no one else can work more dedicatedly than the owner. If you think you can enter an industry which requires massive knowledge in a certain aspect, go ahead.

But, if you are completely new to the business and don’t want complex activities, choose an easy-to-enter industry, like the laundry industry. It will be easy for you to run the business in spite of being a newcomer in such an industry.

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High innovation prospects

We are living in a very competitive world. Every business has to keep upgrading itself to procure a consumer base. To ensure your business stays relevant to your target consumers you should be ready to bring positive changes as and when required. You may have to launch a new service or new product or you may need to shift to newer technology. Bringing such upgrades will be easier if the industry has scope for innovation.

You should know that some industries have immense scope for unique elements, such as laundry, education, tourism, etc. Whereas some industries are rigid in this aspect, such as the chemical industry or mining industry. If you are new to business then you should not prefer rigid industries as it requires intense hard work to bring innovation while working in them.

After finding an ideal industry, there is one important question to ask yourself – Should I start my own business in this industry or should I join a franchise?

If you are sure you can run a business alone, go ahead. However, if you have even the slightest doubt, it is better to join a franchise business otherwise your whole venture may not be successful. And, you must not forget that only a profitable business can be considered a good investment.

So, let’s see how you can have a good investment by joining a franchise or by starting your own business.

Starting Your Own Business Vs Joining A Franchise

Why joining a franchise is better than starting a new business from scratch
Why joining a franchise is better than starting a new business from scratch

Strongly researched foundation

The franchisors have already invested their time, money and effort to understand the industry, market size, profit margins, ROI and all other relevant things of their business already. They have also seen the high and low points of business at the ground level. They understand what practices work best in their favour and how to overcome challenges in business.

When you join a franchise, you will get direct access to its business operation strategies. In a way, you will leverage the benefits of their hard-earned experience. By putting your money in a well-researched and well-established franchise model you will certainly have a good investment.

On the contrary, if you will start a business from scratch, you will have to learn everything on your own. You will have to carry out research about business set-up, marketing, operations, and various other things separately. You will have to face different challenges which might take you to failure as well. The risk factor also increases when you handle a business alone, especially if you don’t come from a relevant background.

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Seamless learning and evolution

In this competitive world, a business has to be dynamic. With changes in customer preferences, government policies, and various other factors, a business should evolve to stay relevant. However, bringing changes to a business model is not easy at all. It takes a lot of time and effort to reform policies and operation methods. In case you fail to bring changes as and when required you may see a downfall. As a result, your venture will clearly not turn out to be a good investment.

However, by joining a franchise you will not have to worry about this aspect. Franchisors keep tweaking their business models as per the requirements. For example, they move away from obsolete technology, they expand their services. Their franchise partners get direct access to this evolution. Hence, their revenue never compromises.

While doing business alone, it is your onus to stay updated. If you think you can stay aware of everything in the industry, you can start your own business. However, if you think you don’t understand technology or you cannot keep a track of changes happening in the business field, it is better to prefer a franchise. They have full-fledged teams to study the dynamic business world, think of evolution and implement changes.

Benefits of brand value factor

If you will start your own business, it will take time to reach your target customers. It will take even more time to attract them and turn them into regular users. You cannot build a brand overnight. However, by joining a reputed franchise you will have a certain consumer base from Day 1 of starting your business.

Franchise will always have a better edge in the market. If there is an industry where brand value matters a lot such as FMCG industry, customers automatically divert towards a trusted and reputed brand. In this case, you should join a franchise with a good reputation so that you can have a huge customer base which leads to high revenue and eventually makes your business a good investment. Brand pull is a real thing. You can always leverage its benefits.

On the other hand, if you are trying to enter an industry where brand image and reputation does matter a lot to the customers, you can start your own business.

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Recruitment & training support

One of the most crucial aspects of a business is its people. Your employees or workers play an eminent role in your success. Their skills, knowledge, expertise and efficiency will eventually determine how well your business performs.

Hence, you should recruit and train manpower in the best possible manner. It may seem easy, however, the job of finding the right people and giving them the right training is cumbersome.

If your franchise business demands heavily skilled employees or workers can you don’t have enough expertise or knowledge in the relevant field, you can prefer a franchisor. Let’s understand this a comparison between courier and healthcare business. In a courier business, the employees can work effectively with some basic on-the-job trainings. However, in a healthcare business (let’s suppose diagnostic labs) employees must have precise skills to work properly.

If you think don’t have the required expertise to train your employees, it is better to choose a franchise. Successful franchisors always care about their franchisees and they provide them with thorough support in all crucial aspects including recruitment and training.

Access to right inventory at right cost

If you have prior experience in the business you might already know what goes into the process of acquiring inventory. And in case you don’t know, let us tell you it’s not easy at all. First of all, you have a clear knowledge of every raw material or consumable that you need. Then you will have to find trusted companies, suppliers, vendors, etc. Thereafter, comes price negotiation, payment, delivery and many other things.

Just one wrong decision or move can really hit your business hard. And this is why trusting a good franchise model is a better decision. They have tie-ups with the reputed and reliable brands, vendors, etc. So, you will get the best of everything at lower prices than the genuine market rates.

On the contrary, if you will start your own business you may not get easy access to right inventory at the right cost.

Marketing & advertising support

Running a business is not a one-time effort. You will have to consistently hustle to reach new customers or stay relevant to your existing customers. Both of these things require rigorous marketing and advertisement which are done online and offline as well.

You can either take all the burden of marketing on your shoulders or simply choose a franchisor who will do it all for you. There are several franchisors who carry out marketing activities and provide a definite conversion to their franchisees as well.

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Some of the crucial marketing activities are as follows:

Traditional/ Offline Marketing

  • Tie-ups with local shops like salons, parlours, and coaching institutions
  • Making and putting canopies in relevant areas
  • Making banners, boards, and fliers, and installing them in ideal places

Digital/ Online Marketing

  • Creating a website
  • Updating a website consistently
  • Promoting business on social media platforms like Facebook, Instagram, Twitter, etc. 
  • Running paid Ads on social media platforms
  • Running paid Ads on Google
  • Listing business in directories (if required)

Key Takeaway

These are the reasons why joining a franchise can be the best way to have a successful business which is definitely a good investment.

We hope you understood whether a franchise will be a good investment or not depending on the industry and the franchise business you choose. If both of these things fit perfectly with the criteria explained in this article, then a franchise will be a good investment. Thus, take some time before joining a franchise and make a well-thought and researched decision.

For more such information on franchise business keep coming back to Tumbledry. We post a lot about the franchise, and not only this, we have our own proven and successful franchise business model.

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Disclaimer: The opinions expressed in this article are those of the author. They do not necessarily purport to reflect the values or views of Tumbledry.

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