BY MARC KIEKENAPP | February 7, 2013
Recently savvy investors have started investing in the franchise industry as a way to diverse their investments into a more controllable asset. Many investors have observed several of the larger public franchise companies growing over the past three years while private businesses and restaurants have diminished in numbers.
Some of the larger private equity groups in the country are now creating franchise portfolios and acquiring several successful national franchise companies. This type of interest from private equity groups has now started to create an interest with smaller investors who are seeking a reasonable return on their investments. The stock market is uncertain, no one is sure where real estate will stabilize, and investment banks are paying all time lows. Why not consider an investment you can control?
As with any investment you would consider it is important that you select an investment level that is right for you. You should schedule a planning meeting with your financial advisor to discuss how much would be the right amount to consider for your investment. Once you’ve established how much to allocate for your franchise investment you can then seek out the franchise opportunity that would fit your expected return on investment and a comfortable investment level.
A franchise investment is much different than a passive investments that you may have made in the past, and will take a time commitment at some level depending on the franchise opportunity you may choose. I can’t stress how important it is that you understand what it will take to make this investment successful. It is a business and needs your leadership and attention at least 15 hours a week. It is important that you consider how you will want this investment to perform 5 years down the road. What I mean by that is do you want to continue your current employment and add additional units or do you want to create a transition plan so you can gradually move into the franchise business full-time?
As you consider the types of franchises you want to research you should investigate franchise categories that lend themselves to absentee ownership:
Retail Franchise Concepts
- Restaurants
- Health & Fitness
- Hair Salons
- Massage
Children’s Franchises
- Day Care
- Education
- Entertainment
Pet Related
- Day Care/Boarding
- Training
- Retail Food Store
Restaurants are generally a larger investment and in many cases several investors will create an operating group and manage several locations together. If you are considering the restaurant category it is important that the franchisor is willing to assist you in hiring the correct manager to operate your franchise unit. The right manger is one of the key components.
Health and Fitness is a growing industry and with the awareness of America being out of shape continues to expand. There are several levels of investments in this franchise category which is easily operated with multiple units. There is a wonderful employment pool of managers to operate these types of businesses.
The Beauty Industry will always be a strong category because America still wants to look and feel good! And that franchise category is growing by leaps and bounds year after year. High end men’s hair cutting salons are opening daily across America and memberships at day spas, salons and massage therapy are growing. This again is an investment level that allows many investors a reasonable entry cost.
The Pet industry has been realizing double-digit growth over the past several years. Americans continue to own pets and spend large amounts of money on boarding, pet sitting, grooming, and training. This is a great franchise category to investigate and has a wide investment range of franchise opportunities.
As you investigate franchising as an investment I believe you will start to realize that having the ability to control your investment because of your ownership position will make you more comfortable. As you explore deeper into the financial returns you will soon realize that franchising has become a great investment to add to your portfolio. There are very few investments available today that will give you the return on investment, and the tax benefit as owing your own franchise.