Becoming a Franchisee: A Good or Bad Small Investment Business Idea?

Reading Time: 3 minutes

If you want to find a small business for sale, but have come up short on the necessary funds, then you need to answer this question first – did you know that you can start a business with just £1,000 by merely taking up a franchise business instead?

Franchising opportunities have long been established as a staple small investment business worldwide, and many Brits who found success as franchising partners did only start a business with £1000 UK money! However, since we are discussing start-ups rather than pre-established, multinational franchises such as Burger King or Tesco, does the same still apply?

It’s a difficult question to answer, but let’s get into the details next. We will briefly discuss the various aspects you should expect and prepare for if you are looking to join a franchising opportunity from a brand new, small investment business.

Home Based Operations are More Likely with Startups

Not that larger companies do not have home-based franchising opportunities nowadays because the pandemic has forced the work from home model on nearly everyone. However, you are much more likely to work out an almost entirely home-based schedule by discussing it with a smaller company that has just started. In light of the present restrictions and the critical need for social isolation, that is undoubtedly advantageous.

Convenience and Availability

The more popular a brand is, the less your chances of getting a franchise opportunity. The reasons for this problem can be defined as follows:

  • Unavailability: If we are discussing big retail or fast-food chains such as Tesco or McDonalds, they have already saturated the popular areas
  • Inconvenience: They might still have franchising opportunities, but they could very well be in a different city, town or county altogether
  • Competition: Established franchise owners are the first to know about new opportunities, and they have funds to gobble up those opportunities before anyone new can avail of them
  • Expense: larger businesses charge more money, which puts their franchising opportunities out of the reach of many

On the other hand, if you go with a small investment business franchise that has only just started, none of these problems are applicable.

Business Growth Opportunities

Better Growth Opportunities

When your new franchise partner is prospective, you will grow along with their new company. You can become one of the first franchise holders for a business that could eventually grow to all new heights down the line. The YoY growth rate is much higher for franchisee owners of successful startups than those of established chains.

Future Purchasing and Partnership Opportunities

After holding the franchise for a while, you should tell which way their business is going. If it feels like a prospective path, the franchising opportunity could turn into a more solemn investment opportunity as well. You can ask if they are now approachable as a small business for sale, provided that you have the funds to buy it from them, of course.

You may not be able to buy Domino’s Pizza or Amazon franchise. Still, smaller ventures often go on sale due to a lack of funding, providing even the smaller businessmen with the opportunity to make significant partnership investments in their franchisor’s business. It’s something worth considering, especially if you already have a background in buying, managing, and growing companies.

The Risk Factor

Every business is liable to fail, but the chances of a startup failing are far higher than those of an established brand. If you partner up with a new business, understand that you are taking a more significant risk. There is, however, a lot less to lose by investing in a small business for sale. In other words, the chances of failure are higher with startups, but the actual stakes could be much, much lower. Consider them medium risk, low investment opportunities, with moderate chances of a high return on investment.

Given that most startup businesses take a long time to break even themselves, the initial profits may or may not be that great for the franchisee. However, the cost of initiation is also a lot lower for small investment business franchises. This means that you won’t need a high sales number to generate profits, unlike how it is with larger franchisors, who will demand significantly high investments from you upfront as well as on a continuous basis.

Related Articles

Recent Stories

Popular Searches