Are Franchises a Good Investment?
Published on: 27 March, 2020
Reading Time: 5 minutes
Some of the most common questions asked about franchise opportunities in Canada are, “Do franchise owners make money?”, “Is it profitable to open a franchise?”, “What is the most profitable franchise to own?” There’s obviously a pattern here and that’s the big question of whether franchises make a good investment or not.
A franchise is a readymade business opportunity for entrepreneurs looking to rid themselves of limited job growth and to become their own boss. As a franchisee, there’s no limit on income-earning potential. Choose your franchise in Canada widely and you also receive the training, guidance, and support you need to succeed. As it pertain to whether a franchise is a worthy investment to make, here are the facts.
There’s a track record of success
There’s a lot of economic strength to franchising as a whole. The number of franchises are growing Canada-wide. Across the last five years, job growth in franchising has grown by 2.6 annually which is almost 20 percent higher than other businesses. There’s a lot of entrepreneurs interested in franchising and a lot of talented franchisees out there who are turning profits.
Some quick facts about franchising in Canada
Across Canada, there are more than 76,000 franchise outlets currently operating with 4,300 new franchises opening every year. Also, within the last five years of all the franchises that have opened, 97% of them are still in business. Franchising in Canada collectively represents more than $100 billion in sales annually and this number continues to grow. Needless to say, there are profits here.
How much money does a franchisee make?
A potential franchise owner has no guarantee of how much money they will earn from the purchase and operations of a franchise. Unfortunately, it is difficult to find out how much money the average franchisee makes because the data simply isn’t available. To give any number could be misleading however with the limited data available, many claim the average annual income of a franchise owner varies between $75,000 and $125,000. There are also some exceeding this amount. It ultimately depends on the category of business, the market, and the opportunity.
Nothing is guaranteed in business
Just because you sign up for a franchise doesn’t mean you’re assured instant success. A lot of variable are at play and for this reason, you want to find a Canadian franchise with a proven track record in profitable franchisees. Not every franchise is created equal. A franchise does increase the odds of success in business because you have more supports and in that respect, franchising is an amazing business investment opportunity. That said, you need to do your due diligence in choosing the right company for you.
Are you willing to bet on yourself?
As someone buying a franchise in Canada, you’re signing up to be an independent business owner and entrepreneur. You’re going to take methods and systems, and an established brand, and execute a plan that will bring you to reap rewards. It’s on you to execute. If you have the determination, skills, and willingness to do what it takes to make your franchise work, you can achieve the success you’ve dreamed of. If you’re not committed to the long haul or sit back while you see resources squandered, like any other business, you will fail and if it happens like that, that’s on you.
A franchise is not a passive investment
When you buy a franchise, you’re committing yourself to making it successful. It’s not an investment you make and then sit back to watch the money come flowing in. It’s not like managing an investment property or trading stocks. Depending on the job, you may find yourself working 60, 70 or more hours a week. Even if you hire a manager to run the operations, you’re still in charge and you’ve got to be there in some capacity to handle the business. Franchises are not passive investments and they really aren’t for the lazy.
The measure on if a franchise is a good investment leans heavily on the profits it generates. Even with big revenues, if your expenses are beyond your means as a Canadian business owner, a franchise isn’t going to provide the return you want. A smart franchisee keeps close tabs on expenses, seeking to reduce costs wherever possible while simultaneously doing what needs to be done to bring up revenues. By tackling both ends of the business book, you’re setting yourself up for a successful investment.
Ideally, a franchisee wants to start generating profit the day they open the doors. This isn’t always possible but for some franchisees in Canada, they get well on their way there. The unfortunate thing, from an investment perspective, is that some franchisees can cost an exorbitant amount to buy into. For example, a McDonald’s franchise costs between $1 million and $2.2 million, a 7-Eleven up to $1.1 million, and a Taco Bell between $525,000 and $2.6 million. Preferably, as an investor, you want to find a franchise where the upfront start-up investment is small.
Starting your own business or buying a franchise – Pros and Cons
When you buy a franchise, you’re making a commitment but you also have help, training, and in some cases financial assistance from your franchisor. You will receive a tremendous amount of tools and resources you wouldn’t otherwise have. Your success is their success so they have a reason to help you. Alternatively, if you go it alone starting your own business, the financial risk is all yours. You don’t have a mentor to call, no assistance in any way regarding operations, and no corporate help in marketing your business and getting the word out.
If you haven’t owned a business before, it’s not a healthy investment of your time or money to go it alone. Invest in a franchise and you can build your skill set, gain experience, and make money pretty much from day one. Invest in a moving franchise company in Canada with Metropolitan Movers, and we will work day and night to make your investment and our investment a total, undisputed success.