​Owning a Franchise Can Be an Opportunity for Consistent Revenue & Profits


​Owning a Franchise Can Be an Opportunity for Consistent Revenue & Profits

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You may have always wanted to own an LLC business, but maybe getting that business off the ground intimidates you. You might not know where to start when creating a business from scratch, let alone a franchise business!

There’s a lot to think about when forming your own business: picking a name, designing a logo, choosing a color scheme, finalizing your product/services, building a website, establishing a social media presence, hiring employees, developing a company culture and structure, crafting a marketing and advertising strategy … and even more!

Plus, if you want to own a business with a physical location, you’ll need to develop the overall look and feel of the space. That’s a lot to decide! If you don’t have prior business experience, it may all feel too overwhelming and cause you not to start in the first place.

However, all of those little (but important) decisions shouldn’t deter you from owning a business — there are other options to consider. When you don’t want to start from scratch, a great alternative is buying a franchise business. With so many franchise opportunities out there, it’s difficult to navigate through all of the options. Here’s what you need to know.

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What Is a Franchise?

A franchise is an arrangement where a franchisor entity authorizes a franchisee the right to use its trademark/trade name (as well as certain franchise business systems and processes) to produce and market a product or service according to certain specifications.

For the opportunity to hop on the parent company's success, the franchisee usually has to pay a one-time fee plus a percentage of sales revenue as a royalty. But the franchisee also gets plenty of advantages:

  • Name recognition the company may already have
  • Insight of tried and tested products/services
  • Location design/decor standards
  • Proven techniques for running the business
  • Procedures for training employees
  • Ongoing help in promoting products/services

Rather than assume the risks of creating a business yourself, buying a franchise business can offer greater financial security and potentially quicker profits. This means that owning a franchise can be an opportunity for consistent revenue and profits.

Plus, you don’t have to waste time and money trying to figure out what works and what doesn’t, since the parent company has already done the heavy lifting for you.

The Latest Trends for Franchise Businesses

woman writing on white board

According to the International Franchise Association (IFA), this is a business model that works: there were approximately 773,000 franchise businesses in 2019 that provided 8.4 million jobs in the United States, with an economic output of over $787 billion.

IFA forecasted that the number of franchise businesses in 2020 would grow 1.5 percent and take the total number of franchise businesses up to over 785,000. While the numbers remain to be seen after the recent economic downturn, there is still hope to be had as many states begin to reopen businesses.

Evaluating Franchise Opportunities 

Choosing a franchise involves research and considering your personal interests. Pick something you're interested in that would also make you happy to own and manage.

You also need to consider what would be a profitable investment. You don't want to invest in a dying industry, for example, or sell a product/service that will be outdated in a matter of months. Think strategically about what type of franchise business you’re getting involved in, and research the industry, company, case studies, profits, etc.

Lists like the Entrepreneur Franchise 500 Ranking and Fundera's 10 Most Profitable Franchises in 2020 can provide direction on what franchises are currently performing well. Also search the best franchises in your state to narrow down your options. Maybe the franchise you really want isn’t available in your state or doesn’t make sense for you geographically. You may need to pick a new option, move or determine a different location for the franchise.

Once you do find that perfect franchise to own, make sure you vet the company. Do all the research you can on the company itself. What do other franchisees have to say? What about their employees? Are they making a profit, and do they have happy shareholders? Consider shadowing another franchise business owner to see how they operate and think about whether this is a model you’d be willing to follow.

Potential Profits with a Franchise Business

employee working at drink bar

According to CareerBliss.com, the average franchise business owner makes around $60,000 a year. FranchiseBusinessReview.com reports that 16 percent of franchise business owners earn over $200,000 per year.

Don't forget that it may take a while for your business to ramp up to these numbers. Speak with other franchise business owners who also own a franchise that you're looking at and confirm that the income expectations and business projections for the next five years are realistic (you don't want any surprises).

Also consider the costs associated with starting a business and how that may affect your profit for the first few years. There will be a franchise fee, building costs and employee salaries, along with supplies and inventory to purchase.

The good news is that once you start seeing steady growth year-over-year, it can afford you the ability to pay yourself more – unless you prefer to dump that money back into the business to help fuel continued growth.

Starting Your Franchise Business with Incfile

Starting a business from scratch isn’t for everyone, but owning a franchise business is a great option that opens the door for consistent revenue and profit.

Typically, a franchise agreement states that each franchisee is an independent contractor who is solely responsible for the safe operation of their franchise. Creating your own separate legal business entity to operate your new franchise business is a wise move.

This is where Incfile can help! With Incfile, you can create your own business entity, and we provide you plenty of other assistance and resources to get your company off the ground.

Not Sure Which is the Right Entity for Your Business? Use Our Free Entity Comparison Guide.
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